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Cotton  Futures 


WITH  COMPLIMENTS  OF 
f\LFRED     B.     Sh  EPPERSON, 
NEW   YORK. 


IvIBRARY 

OF  THE 

University  of  California. 


Class 

i 


V 


;«  fV.^  rules   Cotton  delivered 
APDENDUM-By  a  ^^cent  change  m  thruls     ^^^  ^^^^^^^^^^ 

-:^XZlST^S^^-^^-  -  cen.c.e 
holds  good  for  a  year  from  it's  date. 


"COTTON  FUTURES" 


The  business  of  buying  and  selling 
Cotton  for  Future  Delivery  as  con- 
ducted on  the  N  ewYork,  New  Orleans 
and  Liverpool  Cotton  Exchanges 
and  its  advantages  to  Merchants, 
Manufacturers,  Bankers,  and  Farmers 


BY 

ALFRED  B.  SHEPPERSON 

(Author  of  ^'Cotton  Facts'') 


t^kij  ■» 


NEW  YORK 
ALFRED  B.   SHEPPERSON 

Cotton  Exchange  Buildinq 
1911 


''c^"'^ 


Copyright  by 

ALFRED  B.  SHEPPERSON 

1911 


CONTENTS 

"Cotton  Futures*' — The  business  of  buying  and  selling 
cotton  for  future  delivery  and  it's  advantages  to  cotton 
merchants,  manufacturers  and  farmers  fully  explained  by 

Alfred  B.  Shepperson,  of  New  York i 

Letters  from  Cotton  Merchants  respecting  "Cotton 
Futures,"  viz  : 

Wm.  Almy  &  Co.,  Boston,  Mass ^J 

Anderson,  Clayton  &  Co.,  Oklahoma  City,  Okla 42 

S.  C.  Alexander  Cotton  Co.,  Pine  Bluff,  Ark 19 

Barry,  Thayer  &  Co.,  Boston,  Mass 36 

.  Felix  P.  Bath  &  Co.,  Fort  Worth,  Texas 4 

Lucius  Beebe  &  Co.,  Boston,  Mass 40 

S.  D.  Bush  &  Co.,  Boston,  Mass 38 

Bush  &  Witherspoon   Co.,   Waco,   Texas 3-13 

L.  P.  Barkdull  &  Co.,  Fort  Smith,  Ark. . . ". 20 

E.  Bornemann  &  Co.,  Savannah,  Ga 25 

Boyd-Overman  Co.,  Salisbury,  N.   C 33 

C.  Cochrane  &  Co.,  Augusta,  Ga 27 

Cooper  &  Griffin,  Greenville,  S.  C 34 

Coate   Bros.,   Memphis,  Tenn 12 

W.  C.  Craig  &  Co.,  Vicksburg,  Miss 15 

F.  M.  Crump  &  Co.,  Memphis,  Tenn 11 

Cooper  &  Brush,   Boston,    Mass 39 

E.  H.  &  E.  L.  Carter,  Meridian,  Miss 16 

W.  J.  Davis  &  Co.,  Jackson,  Miss .' 15 

L.   G.  Doughty  &  Co.,  Augusta,  Ga 24 

H.  L.  Edwards  &  Co.,  Dallas,  Texas 2 

Esteve  Bros.  &  Co.,  New  Orleans,  La 30 

Esteve  Bros.  &  Co.,  Savannah,  Ga 25 

E.  S.  Flint  &  Co.,  Galveston,  Texas 10 

F.  Fontanills  &  Co.,  Savannah,  Ga 26 

B.  B.  Ford  &  Co.,  Macon,  Ga 24 

Farmers'  and  Spinners'  Cotton  Co.,  Charleston,  S.  C ZZ 

W.  D.  FeMer  &  Co.,  Dallas,  Texas 3 

Frierson   Bros.,    Ada,   Okla 45 

H.  G.  Grimley,  Mobile,  Ala 28 

Hazard  Cotton  Co.,  Providence,  R.  T 41 

Howel  Cotton  Co.,  Rome,  Ga 23 

M.  Hohenberg  &  Co.,  Selma,  Ala 29 

Hooper  &  Buffinton,  Fall  River,  Mass 36 

Heard  &  Pollard,  Houston,  Texas i 

Humphrey  &  Co.,  Greenwood,  Miss 17 

Ingersoll  Amory  &   Co.,  Boston,   Mass 39 

Inman,  Nelms  &  Co.,  Houston,  Texas i 

Inman,  Akers  &  Inman,  Atlanta,  Ga 21 

Inman,  Akers  &  Inman,  Atlanta,  Ga.  (March  17th,  toU.  S. 

Senators  A.  O.  Bacon  and  J.  M.  Terrell) 21 


223170 


A.  J.  Ingersoll  &  Co.,  Shreveport,  La 30 

Karow  &  Forrer,  Savannah,  Ga 26 

H.    Kempner,    Galveston,    Texas 7 

Love   &  Thurmond,   Ardmore,    Okla 45 

Lehman,  Weil  &  Co.,  Montgomery,  Ala 28 

J.  E.  Latham,  Greensboro,  N.  C * 32 

E.  Martin   &   Co.,   New   Orleans,   La 28 

Mortimore  &  Co.,  Greenville,  Texas 5 

Miiller  &  Co.,  Galveston,  Texas to 

F.  C   Olds  &  Co.,   Abilene,  Texas 8 

Parker  Bros.  &  Co.,  Raleigh,  N.  C 32 

Jas.  S.  Patteson  &  Co.,  Memphis,  Tenn 11 

R.  F.  Phillips  &  Co.,   St.  Louis,  Mo 35 

Reid  &  Co.,  Norfolk,  Va 34 

Benj.  Rhett  &  Co.,  Mobile,  Ala 27 

Robards  Cotton  Co.,  San  Antonio,  Texas 8 

Sanders,  Orr  &  Co.,  Charlotte,  N.  C 32 

Alex.   Sprunt  &  Son,  Wilmington,  N.  C 31 

F.  G.   Smith  &  Co.,  Austin,  Texas 6 

Chas.  Storrow  &  Co.,  Boston,  Mass 38 

Stewart  Bros.  Cotton  Co.,  New  Orleans,  La 30 

Eustace  Taylor  Cotton  Co.,  Galveston,  Texas 10 

Threefoot   Bros.,   Meridian,    Miss 17 

Van    Leer   &   Co.,    Philadelphia,    Pa 41 

Weld-Neville  Cotton  Co.,  Houston,  Texas 7 

John  Wilkie  &  Co.,  New  Orleans,  La 29 

Wild  &  Orme,   Paris,  Texas , 6 

Wilson  &  Moodie,  Gainesville,  Texas 9 

Wooten  &  Horner,  Helena,  Ark 19 

Letters     from     Southern     Banks     respecting     "Cotton 
Futures,"  viz  : 
S.  C.  Alexander,   Pres't,  Merchants'  and  Planters*  Bank, 

Pine  Bluff,  Ark 58 

Fred    W.    Catterall,    Cashier,   First   National   Bank, 

Galveston,  Texas 62 

J.   W.   Downward,   Pres't,   First   State   Bank,    Gainesville, 

Texas         ...      .    ..         .       61 

H.  R.   Eldridge,  Vice-Pres't,'  First    National*  Bank, 

Houston,   Texas 60 

J.  W.  Gladney,  Cashier,  First  National  Bank,  Gainesville, 

Texas  61 

Wm.   R.    Hamby,    Pres't,   Citizens'   Bank   and   Trust   Co., 

Austin,  Texas   61 

W.  R.  Humphrev,  Pres't,  Delta  Bank,  Greenwood,  Miss. .  59 
J.   M.  Lindsay,   Pres't,  Lindsay  National   Bank, 

Gainesville,   Texas 61 

Edwin  McMorrics,  Pres't,  First  National  Bank,  Meridian, 

Miss 59 

H.  C.  McQueen,   Pres't,  Murchison  National  Bank, 

Wilmington,  N.  C 57 

P.  A.  Norris,  Pres't,  First  National  Bank.  Ada,  Okla 58 

W.  H.  McCullough,  Pres't,  Central  Texas  National  Bank, 

Waco,   Texas    60 


H.  M.  Street,  Pres't,  Citizens'  National  Bank,  Meridian, 
Miss 57 

T.  O.  Vinton,  Pres't,  Bank  of  Commerce  and  Trust  Co., 
Memphis,    Tenn 56 

H.  P.  Ware,  Pres't,  German- American  State  Bank,  Gaines- 
ville, Texas   61 

E.  P.  Wilmot,  Pres't,  Austin  National  Bank,  Austin,  Texas     56 

P.    Youree,    Pres't,    Commercial    National    Bank,    Shreve- 

port.  La 55 

Exchanges,  Boards  of  Trade,  etc.,  respecting 
"Cotton  Futures,"  viz.  : 

Telegram,  February  14th,  of  Augusta,  Ga.,  Cotton  Ex- 
change to  U.  S.  Senators  and  Members  of  House  of 
Representatives  from  Georgia 20 

Telegram,  February  15th,  of  Fort  Worth,  Texas,  Grain  and 
Cotton  Exchange  to  U.  S.  Senators  Bailey  and  Culberson     14 

Telegram,    February    15th,    of   Gainesville,    Texas,    Cotton  - 
Exchange  to  U.  5.  Senators  Bailey  and  Culberson 9 

Telegram,   February   i6th,   of   Galveston,  Texas,    Cotton 
Exchange  to  U.  S.  Senator  Joseph  A.  Bailey 46 

Telegram,  February  i6th,  by  Merchants  of  Galveston, 
Texas,  to  U.  S.  Senators  Bailey  and  Culberson 46 

Letter,  May  2d,  of  Greenville,  Texas,  Cotton  Exchange  to 
Alfred  B.   Shepperson 53 

Telegram,  February  14th,  by  Houston,  Texas,  Cotton  Ex- 
change and  Board  of  Trade  to  Chairman  of  U.  S.  Senate 
Committee  on  Interstate  Commerce 52 

Resolutions,  April  loth,  of  Macon,  Ga.,  Cotton  Exchange    26 

Telegram,    February    14th,    of   Memphis,    Tenn.,    Cotton 

Exchange  to  U.  S.  Senator  Robert  L.  Taylor 18 

Telegram,  February  14th,  of  Memphis,  Tenn.,  Merchants' 
Exchange,  to  U.  S.  Senator  Robert  L.  Taylor 18 

Telegram,  February  15th,  of  Mobile,  Ala.,  Cotton  Exchange 
to  Chairman  of  U.  S.  Senate  Committee  on  Interstate 
Commerce  40 

Letter,  February  i6th,  of  Norfolk  and  Portsmouth  (Va.) 
Cotton  Exchange  to  U.  S.  Senator  Thomas  S.  Martin, 
from  Virginia  54 

Telegram,  February  15th,  of  New  England  Cotton  Buyers' 
Association,  Boston,  to  U.  S.  Senators  from  Massachusetts    35 

Letter,  March  17th,  of  Oklahoma  State  Cotton  Exchange 
to  U.  S.  Senator  Thomas  P.  Gore 47 

Telegram,  February  i6th,  of  Paris,  Texas,  Cotton  Exchange 
to  U.  S.  Senators  Bailey  and  Culberson 52 

Resolutions,  February  17th,  of  Richmond  (Va.)  Chamber 
of   Commerce    53 

Telegram  and  Resolutions,  February  15th,  of  Savannah, 
Ga.,  Cotton  Exchange  sent  to  U.  S.  Senators  A.  O.  Bacon 
and  Jos.  M.  Terrell,  and  to  Chairman  of  U.  S.  Senate 
Committee  on  Interstate  Commerce 53 

Telegram,  February  15th,  of  Shreveport,  La.,  Chamber  of 

Commerce  to  U.  S.  Senators  from  Louisiana 31 

The   Scott   Anti-Futures   bill   offered   in  the  61  st   Congress    63 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/cottonfuturesbusOOsheprich 


"  coTToH  'fixtures" 

The  business  of  buying  and  selling  cotton  for  future  delivery  and 

its  advantages  to  cotton  merchants,  manufacturers 

and  farmers. 

The  opinion  is  entertained  by  many  persons  who  have  not 
fully  investigated  the  subject  that  the  transactions  on  the  New 
York  and  New  Orleans  Cotton  Exchanges  in  cotton  for  future 
delivery  are  almost  entirely  for  speculation  and  of  no  service  to 
legitimate  interests. 

This  idea  is  very  erroneous,  for  as  a  matter  of  fact  the  facili- 
ties for  the  buying  and  selling  of  "cotton  futures"  on  the  New 
York  and  New  Orleans  Cotton  Exchanges  are  absolutely  essen- 
tial to  the  successful  prosecution  of  the  business  of  cotton  mer- 
chants and  manufacturers  as  now  conducted. 

Cotton  merchants  throughout  the  country,  from  New  England 
to  Texas  and  Oklahoma,  are  constantly  compelled  to  sell  cotton 
of  specified  grades  with  the  stipulation  that  the  delivery  of  some 
or  all  of  it  will  not  be  made  until  months  in  the  future.  By 
buying  "cotton  futures"  at  the  time  of  their  sale  of  actual  cotton 
for  forward  delivery,  the  cotton  dealers  can  protect  themselves 
from  loss  should  an  advance  in  price  occur  before  the  time  for 
them  to  ship  the  cotton.  As  they  buy  the  cotton  to  meet  their 
sales,  they  sell  out  their  purchases  of  "futures,"  and  if  the  price 
of  spot  cotton  has  advanced,  they  will  be  reimbursed  by  the  profit 
on  their  transaction  in  "futures."  If  "futures"  should  decline 
after  their  purchase,  the  loss  will*  be  made  up  by  the  greater  profit 
they  will  make  by  the  decline  in  spot  cotton  since  their  sale  of  it. 

Many  cotton  merchants — and  especially  in  the  interior  markets 
of  the  South — buy  cotton  daily  when  the  receipts  are  liberal, 
though  they  may  have  no  orders  for  it  from  their  correspondents. 
They  constantly  buy  in  anticipation  of  orders,  and  their  buying 
supports  the  market  and  enables  farmers  to  sell  their  cotton 
readily  and  at  much  better  prices  than  they  could  obtain  if  the 
merchants  would  not  buy  without  actual  orders  in  hand  for  the 
cotton  offered. 

As  the  merchants  buy  spot  cotton  in  anticipation  of  orders  for 
it,  they  at  once  sell  "cotton  futures"  in  New  York  or  New  Or- 
leans to  the  extent  of  their  purchases.  This  is  called  "hedging," 
and  protects  them  from  loss  should  spot  cotton  decline  before 
they  dispose  of  their  purchases,  as  their  loss  on  it  would  be  com- 
pensated for  by  their  profit  on  the  sales  of  "futures"  against  it. 


Of  course,  the  merchants  buy  ^n' their  sales  of  '"futures"  as  they 
sell   their   spot  cotton.    ,•."■■'      [ 

In  the  Southern  cities,  and  to^ins  cotton  is  sold  for  cash  on 
delivery,  and  merchants  frequently  have  to  obtain  advances  from 
the  b^nks  before  they  can  draw  against  their  shipments.  It 
greatly  facilitates  the  securing  of  such  advances  when  ''cotton 
futures"  have  been  sold  against  the  cotton  on  which  the  loans 
are  desired,  because  the  spot  cotton  is  thus  protected  from  a 
decline  in   the  market. 

Many  cotton  mills  now  sell  their  product  of  yarns  and  cloth 
for  delivery  many  months  in  the  future,  and  nearly  all  of  them 
try  to  do  so.  In  order  to  do  this  with  safety  they  must  know 
the  cost  of  the  cotton  for  months  before  it  is  manufactured. 
Unless  the  market  for  cotton  "futures"  is  availed  of,  the  only 
way  to  do  this  is  either  to  own  or  to  buy  the  actual  cotton  at 
the  time  the  sale  of  yarns  or  cloth  for  future  delivery  is  made. 
This  would  involve  a  large  outlay  of  capital  with  the  loss  of 
interest  on  it,  besides  the  expense  of  storage  and  insurance  and 
the  loss  in  the  weight  of  the  cotton,  while  not  to  do  so  would 
be  to  speculate  on  the  future   price  of  cotton. 

Under  the  present  methods,  the  cotton  manufacturer  can  safely 
sell  the  product  of  his  factory  for  delivery  far  into  the  future 
by  buying  "futures"  to  the  extent  of  the  raw  material  required, 
and  then  purchasing  the  actual  cotton  as  it  is  needed  for  manu- 
facture and  selling  out  his  "futures"  as  he  buys  the  cotton  to 
meet  his  requirements.  If  the  price  of  cotton  advances  between 
the  time  of  his  purchase  of  "futures"  and  the  date  on  which  he 
buys  the  actual  cotton,  he  will  usually  make  a  profit  on  the 
transaction  in  "futures"  sufficient  to  make  good  the  difference. 
But  for  the  facilities  offered  by  buying  "futu-res"  in  the  manner 
indicated  the  cotton  manufacturer  of  moderate  capital  would  be 
unable  to  sell  his  product  except  for  quick  delivery,  without 
taking  great  risks  of  loss  by  an  advance  in  the  price  of  the 
raw    material. 

The  system  of  dealing  in  "cotton  futures"  gives  manufacturers 
of  moderate  means  equal  advantages  with  those  of  large  capital  in 
selling  their  product  far  into  the  future.  Without  the  aid  of  the 
"futures"  system  it  is  very  evident  that  the  manufacturers  of 
small  or  moderate  capital  would  be  at  a  very  serious  disadvantage. 

One  of  the  most  prominent  of  the  mill  treasurers  of  New 
England  wrote  me  concerning  "cotton  futures"  as  follows : 

"The  system  is,  I  think,  a  great  convenience  to  spinners.  .    .   . 

"The  advantage  of  buying  'futures'   instead  of  actual   cotton 


m 

arises  from  the  saving  of  capital,  interest,  storage  and  insurance. 
The  disadvantage  is  that  the  contract  may  not  be  filled  in  a 
manner  to  meet  all  the  spinner's  v^ants." 

*'But  whatever  convenience  the  system  may  afford  the  spinner, 
it  seems  to  me  that  the  greatest  benefit  is  given  to  the  producer 
of  cotton.  The  existence  of  the  system  proves  that  it  is  for 
the  mutual  advantage  of  buyer  and  seller.  If  it  were  not,  it 
would  not  exist.  Whatever  is  for  the  advantage  of  buyer  and 
seller  must,  in  the  long  run,  benefit  the  producer  by  giving  him 
a  better  average  price  for  his  product.  If  the  planter  wishes 
to  prohibit  the  system  of  buying  and  selling  'futures,'  I  think 
the  manufacturer  should  let  him  have  his  wish.  The  effect  would, 
it  seems  to  me,  be  to  cause  a  large  accumulation  of  cotton  at 
the  receiving  points  at  certain  seasons,  which,  being  held  for 
actual  cash  sale,  would  find  a  smaller  number  of  buyers  than 
now  exist.  There  would  be  times  when  the  load  would  be 
greater  than  the  factors  could  carry,  and  a  buyer  with  ready 
money  could  then  buy  to  great  advantage.  If  'futures'  were 
abolished  the  number  of  buyers  would  be  less,  the  average  price 
lower,  and  the  buyer  in  control  of  large  amounts  of  ready  money 
could,  at  favorable  times,  secure  better  bargains  than  he  now 
does." 

*T  may  add  that  a  spinner  wishing  to  secure  cotton  does  not 
generally  buy  'futures'  in  the  market." 

"He  contracts  with  a  responsible  merchant  for  the  delivery, 
but  the  merchant  would  not  take  the  risk  of  future  prices  unless 
he  could  protect  himself  at  the  time  of  the  contract  by  buying 
what  are  technically  called  'futures.'  " 

This  letter  describes  with  rare  force  and  clearness  the  advan- 
tages of  the  future  delivery  business  to  spinners,  merchants  and 
farmers. 

The  dealing  in  "cotton  futures"  on  the  New  York  and  New 
Orleans  Cotton  Exchanges  is  undoubtedly  of  great  advantage  to 
the  cotton  growers  in  preventing  the  great  depression  in  price 
which  formerly  prevailed  when  the  bulk  of  the  crop  was  being 
marketed. 

Since  the  advent  of  the  future  delivery  business  the  range 
of  fluctuations  in  the  price  of  spot  cotton  has  been  much  narrower 
than  before  that  time,  and  this  has  been  of  great  benefit  to 
cotton  growers,  many  of  whom  are  obliged  to  sell  their  cotton 
in  the  autumn  and  early  winter,  when  receipts  are  largest  and 
prices  usually  the  lowest  of  the  season. 

Should  the  market  for  cotton  advance  to  a  very  remunerative 


IV 

price,  the  cotton  grower  can  secure  this  good  price  for  his  crop 
long  before  its  maturity  by  having  his  cotton  factor  sell  ''futures" 
against  the  crop.  When  the  crop  is  ready  to  be  marketed  it  can 
be  sold  upon  its  own  merits  as  spot  cotton,  and  the  sales  of 
''futures'*  covered  by  the  purchase  of  the  quantity  previously  sold. 

Trading  in  "cotton  futures"  undoubtedly  causes  more  stability 
in  the  market  for  spot  cotton. 

The  buying  of  "futures"  tends  to  advance  the  price,  while  the 
selling  of  "futures"  checks  unreasonable  advances.  The  effect 
of  speculative  buying  and  selling,  therefore,  is  to  make  prices 
for  "futures"  and  for  spot  cotton  more  in  conformity  with  the 
actual  conditions  of  present  and  prospective  supply  and  demand. 

Every  cotton  merchant  of  experience  can  readily  recall  many 
instances  when  an  active  demand  for  "cotton  futures"  has  caused 
an  advance  in  "spot  cotton"  or  checked  and  prevented  a  decline. 

Notwithstanding  the  fact  that  about  60  per  cent,  of  the  Ameri- 
can cotton  crop  is  exported,  it  is  quite  certain  that  for  the  last 
twelve  or  fifteen  years  the  price  of  cotton  has  been  chiefly 
influenced  by  the  New  York  and  New  Orleans  markets. 

Many  can  remember  well  when  the  Liverpool  market  con- 
trolled the  price  of  cotton  in  this  country,  but  that  is  not  the  case 
now,  as  all  well-informed  cotton  merchants  know. 

Frequent  personal  observation  during  the  last  ten  years  has 
shown  me  that  the  trading  in  "futures"  on  the  Liverpool  Cotton 
Exchange  is  often  practically  suspended  while  waiting  for  advices 
from  the  New  York  market,  and  as  soon  as  these  advices  are 
received  by  cable  and  posted  on  the  bulletin  board  of  the  Cotton 
Exchange  the  trading  at  once  resumes  activity. 

I  am  perfectly  confident  that  if  the  trading  in  cotton  for  future 
delivery  on  the  New  York  and  New  Orleans  Exchanges  should 
be  seriously  interfered  with  that  the  price  of  cotton  for  this 
country  would  be  absolutely  dictated  by  the  European  markets, 
and  especially  by  Liverpool. 

It  goes  without  saying  that  most  of  the  cotton  dealers  and 
spinners  in  Europe  would  always  be  in  favor  of  low  prices,  and 
just  as  low  as  they  could  be  forced. 

The  validity  and  perfect  legality  of  contracts  for  the  future 
delivery  of  cotton  and  other  commodities  have  been  upheld  by 
decisions  of  the  State  courts  and  by  the  Supreme  Court  of  the 
United  States. 

In  a  decision  of  the  United  States  Supreme  Court  in  the  suit 
of  the  Chicago  Board  of  Trade  against  the  Christie  Grain  and 
Stock  Company,  read  on  May  8,   1905,  by  Justice  Holmes,  the 


court  vigorously  maintained  the  validity  of  contracts  for  future 
delivery  and  the  methods  of  their  settlement. 

After  affirming  the  legality  of  "futures"  contracts  the  decision 
referred  to  their  settlement  as  follows : 

''We  must  suppose  that  from  the  beginning  as  now,  if  a  mem- 
ber had  a  contract  with  another  member  to  buy  a  certain  amount 
of  wheat  at  a  certain  time  and  another  to  sell  the  same  amount 
at  the  same  time,  it  would  be  deemed  unnecessary  to  exchange 
warehouse  receipts.  We  must  suppose  that  then,  as  now,  a 
settlement  would  be  made  by  the  payment  of  differences,  after 
the  analogy  of  a  clearing  house.  This  naturally  would  take 
place  no  less  that  the  contracts  were  made  in  good  faith  for 
actual  delivery,  since  the  result  of  actual  delivery  would  be  to 
leave  the  parties  just  where  they  were  before.  Set-off  has  all  the 
effects  of  delivery.  The  ring  settlement  is  simply  a  more  com- 
plex case  of  the  same  kind.   ..." 

"The  fact  that  contracts  are  satisfied  in  this  way  by  set-off  and 
the  payment  of  differences  detracts  in  no  degree  from  the  good 
faith  of  the  parties,  and  if  the  parties  know  when  they  make 
such  contracts  that  they  are  very  likely  to  have  a  chance  to  satisfy 
them  in  that  way  and  intend  to  make  use  of  it,  that  fact  is 
perfectly  consistent  with  a  serious  business  purpose  and  an  intent 
that  the  contract  shall  mean  what  it  says.  .    .   .'* 

On  July  21  and  22,  1892,  the  Hon.  Edward  Douglass  White, 
then  Senator  from  Louisiana  and  now  Chief  Justice  of  the 
Supreme  Court  of  the  United  States,  delivered  a  speech  in  oppo- 
sition to  a  bill  then  under  consideration  in  the  U.  S.  Senate 
which  would  have  practically  prohibited  the  buying  and  selling 
of  cotton  for  future  delivery. 

Of  the  perfect  legality  of  contracts  for  cotton  for  future  deliv- 
ery and  the  unconstitutionality  of  federal  laws  to  prohibit  such 
contracts   the   distinguished   speaker  said   in  part: 

"The  purpose  of  this  bill  is  to  strike  down  contracts  which 
,  can  be  validly  entered  into,  protected  by  the  judgments  of  the 
courts  of  last  resort  of  all  this  Union.  I  challenge  any  Senator 
upon  this  floor  to  produce  a  single  modern  authority  which  does 
not  recognize  that  the  right  to  make  these  contracts  under  the 
dominion  and  jurisdiction  of  the  State  courts  is  as  absolutely 
sacred  and  as  well  protected  by  the  aegis  of  the  State  law  as  his 
right  to  hold  his  home,  or  any  other  right  that  he  has  within  ' 
the  dominion  of  the  State. 

"This,  then,  is  a  bill  licensing  the  Federal  Government  to  step 
over  the  State  line  and  destroy  any  contract  m.ade  within  a  State 


between  citizens  of  the  State  which  the  Federal  Government  may 
choose  to  destroy. 

"Is  it  denied  that  these  are  valid  contracts?  Is  it  denied  that 
they  are  contracts  made  under  the  State  law  and  under  protection 
of  the  State  courts?  Is  it  denied  that  this  bill  strikes  at  con- 
tracts between  citizens  of  the  State  and  a  res  or  a  thing  within 
that  State  ?  That  being  the  case,  I  ask  Senators,  mindful  of  their 
great  oath  to  support  the  Constitution  of  the  United  States,  where 
within  the  four  walls  of  that  Constitution  can  they  find  a  pretext 
for  this  great  usurpation  of  authority?  If  the  theory  which  this 
bill  propounds  is  true,  every  vestige  of  State  autonomy  has  been 
wiped  off,  and  to-day,  instead  of  having  a  government  of  limited 
and  restrictive  powers,  each  government  moving  by  the  force  of 
constitutional  gravity  in  its  own  orbit,  we  stand  the  most  un- 
limited and  arbitrary  government  on  the  face  of  God's  earth. 

"Now,  how  will  Senators  justify  this  measure?  I  put  it  to 
every  Senator,  does  this  power  exist  in  the  Federal  Govern- 
ment? I  challenge  any  Senator  to  say  that  he  believes  the  power 
exists  in  the  Federal  Government  to  go  into  a  State  and  destroy 
contracts  made  between  citizens  of  the  State  protected  by  State 
laws,  contracts  outside  of  the  domain  of  federal  jurisdiction. 
Can  the  Federal  Government  regulate  marriage?  Can  it  regulate 
divorce?  Can  it  determine  the  title  to  property?  Can  it  pass 
upon  the  tenure  by  will?  Can  it  usurp  all  the  functions  reserved 
to  the  States  as  a  necessary  part  of  the  existence  of  the  State 
governments?  If  it  cannot  do  these  things,  by  what  mandate 
of  authority  can  this  proposed  law  be  put  upon  the  statute  books?" 

Speaking  of  the  advantages  derived  from  the  system  of  "cotton 
futures,"  he  said : 

"The  inevitable  tendency  of  modern  business  is  to  draw  people 
together,  to  make  intercommunication  of  man  with  man  greater. 
The  inevitable  result  is  equality.  The  "futures"  business  is  the 
necessary  result  of  the  struggle  between  men  for  equality.  Before 
the  "futures"  business  came  into  being,  the  large  capitalists  had 
to  furnish  the  money  with  which  to  carry  on  commerce.  This 
"futures"  system,  as  I  have  said,  is  the  result  of  the  struggle 
for  equality.  Before  it  came  large  fortunes  were  required  to 
carry  and  hold  the  products  and  submit  to  the  great  expense 
and  risk  which  resulted  from  the  holding  them  until  taken  by 
consumers,  whereas  now  the  ingenuity  and  quickness  of  the 
minds  of  men,  responding  to  the  wants  of  modern  trade,  have 
engendered  this  system  of  future  delivery,  which  has  put  every 
man  upon  a  footing  of  equality  with  every  other  man,  enabling 


one  without  large  capital  to  be  the  equal  relatively  of  the  man 
with  great  capital." 

**See  what  a  revolution  it  has  worked  in  the  Southern  States. 
Formerly  great  masses  of  cotton  would  come  to  the  city  of  New 
Orleans  and  be  stored.  The  buyer  was  gone.  Decline  was  rapid. 
It  required  the  actual  presence  of  a  man  of  means  to  buy  this 
property  in  order  to  hold  it,  because  the  buyer  must  submit  him- 
self to  the  risk  of  loss  if  cotton  declined." 

''What  is  the  cotton  situation  now  ?  Why,  the  receipts,  as  they 
come  in,  are  distributed  over  the  year  under  this  system  of  future 
contracts.  Cotton  is  bought  for  future  delivery  and  is  thus  taken 
from  the  spot  market.  The  small  consumer  is  enabled  to  buy 
because  he  is  not  obliged  to  pay  cash,  but  can  take  advantage 
of  a  transaction  for  future  delivery.  That  is  the  situation.  It 
has  curtailed  the  profits  of  the  millionaires.  It  has  reduced  the 
charge  to  the  producer." 

Every  statement  and  argument  advanced  by  this  eminent  states- 
man and  jurist  is  as  applicable  now  as  when  he  made  his  able 
address  in  the  Senate. 

Sales  of  cotton  for  future  delivery  were  made  in  New  York 
as  early  as  1863.  These  sales  were  chiefly  of  cotton  on  vessels 
in  transit  to  European  ports,  and  the  ownership  of  the  cotton 
changed  hands  frequently  before  arrival  at  destination. 

The  increasing  volume  of  the  business  caused  the  organization 
of  the  New  York  Cotton  Exchange,  chiefly  for  the  better  regu- 
lation of  the  system  of  trading  in  cotton  for  future  delivery. 

The  business  of  buying  and  selling  cotton  for  future  delivery 
in  about  the  same  manner  as  now  transacted  on  the  Cotton 
Exchanges  of  New  York,  Liverpool  and  New  Orleans  was  reg- 
ularly inaugurated  in  New  York  in  September,  1870,  when  the 
New  York  Cotton  Exchange  established  rules  and  regulations  for 
its  systematic  conduct.  Under  the  auspices  of  the  Liverpool 
Cotton  Association  (or  Exchange)  similar  trading  in  "cotton 
futures"  was  commenced  in  Liverpool  in  1873. 

The  business  in  "cotton  futures"  was  established  by  the  New 
Orleans  Cotton  Exchange  in  January,  1880. 

By  the  "future  delivery"  system  of  trading  on  these  Exchanges 
contracts  are  made  for  the  purchase  and  sale  of  cotton  to  be 
delivered  as  far  in  the  future  as  ten  to  twelve  months  from  the 
date  of  the  transactions,  though  the  greater  part  of  the  trading 
is  for  deliveries  within  four  or  five  months  in  the  future. 

The  "futures"  contracts  dealt  in  on  the  Cotton  Exchanges  of 
New  York,  Liverpool  and  New  Orleans,  while  differing  in  many 
details,   are   alike   in  the  following  essential  particulars. 


Vlll 

First.  The  time  of  delivery  within  the  period  during  which  the 
contract  calls  for  delivery  is  at  the  option  of  the  seller,  who  is 
required  to  give  to  the  buyer  written  notice  of  the  exact  date  upon 
which  he  will  deliver  the  cotton  contracted   for. 

This  notice  of  intention  to  deliver  upon  a  specified  date  must 
precede  delivery  three  days  in  New  York,  five  days  in  New 
Orleans  and  ten  days  in  Liverpool.  New  York  and  New  Orleans 
contracts   restrict  the  delivery   within   the   month   named. 

Second.  The  contracts  are  all  for  cotton  grown  in  the  United 
States  and  baled  in  what  are  known  as  ''square  bales.'* 

The  least  quantity  for  which  a  "futures"  contract  is  made  is 
for  50,000  pounds  (gross  weight)  in  New  York  and  in  New 
Orleans,  and  48,000  pounds   (net  weight)   in  Liverpool. 

In  New  York  and  New  Orleans  the  price  stipulated  in  the 
contracts  is  for  middling  cotton,  with  additions  or  deductions  for 
other  grades  according  to  rates  fixed  by  the  regulations  of  the 
Exchanges.  The  seller  has  the  option  of  delivering  any  grades 
from  good  ordinary  (white)  to  fair,  inclusive,  and  in  New  York 
if  stained  or  ''tinged"  cotton  not  below  middling,  stained,  or 
low  middling,  tinged.  In  New  Orleans  the  lowest  grade  of 
stained  cotton  tenderable  is  low  middling,  stained. 

In  Liverpool  the  contract  price  is  for  middling  cotton  with 
additions  or  deductions  for  other  grades  to  be  settled  by  arbi- 
tration, but  nothing  below  the  value  of  good  ordinary,  white,  can 
be  delivered.  Contracts  in  Liverpool  usually  give  the  seller 
two  months  in  which  to  deliver,  and  the  seller  may  tender  the 
cotton  at  his  option  during  those  months.  Liverpool  contracts 
•  are  sometimes  made,  however,  restricting  the  delivery  within  a 
single  month. 

Trading  in   "futures"   is   now  done   in   New   York  and   New- 
Orleans  by  hundredths  of  a  cent  and  in  Liverpool  by  two  hun- 
.   dredths  of  a  penny. 

The  uncertainty  as  to  the  date  of  delivery,  and  also  as  to  the 
grades  of  cotton  which  the  seller  may  deliver,  has  the  effect 
of  generally  keeping  the  price  of  "futures"  contracts  below  the 
price  of  cotton  for  immediate  delivery  (known  to  the  trade  as 
"spot  cotton"). 

In  New  York  and  New  Orleans  the  parties  to  a  "futures" 
contract  can'  require  each  other  to  deposit  money  in  a  bank  or 
trust  company  as  "margins"  for  such  amounts  as  the  variations 
of  the  market  for  like  deliveries  may  from  time  to  time  warrant. 
In  New  York  an  "original  margin"  up  to  $5  per  bale,  to  remain 
in  bank  or  trust  company  until  settlement  of  the  contract,  may 


be  required  by  either  party,  provided  demand  therefor  is  made 
i  within  twenty-four  hours  after  the  transaction.  The  party  de- 
I  manding  "original  margin"  must  also  deposit  an  equal  amount 
!   himself. 

In  Liverpool  the  ''futures"  contract  business  is  usually  done 
upon  what  are  called  ''weekly  settlement  terms."  By  this  plan, 
on  every  Thursday  all  contracts  are  settled  through  a  cotton 
clearing-house  to  the  basis  of  the  market  price  for  like  deliveries 
on  the  preceding  Monday  at  ii  a.m.  as  declared  by  the  Cotton 
Association  Committee.  The  differences  are  paid  to  the  party 
to  the  contract  in  whose  favor  the  market  has  turned.  Through 
the  clearing-house  system  these  differences  go  back  and  forth 
between  buyer  and  seller  until  the  contract  is  settled.  It  is  not 
usual  to  call  margins  on   Liverpool  futures. 

In  Liverpool  and  in  New  Orleans  the  cotton  delivered  upon 
"futures"  contracts  is  inspected,  classed,  and  weighed  each  time 
*  it  is  delivered. 

In  New  York,  since  September  i,  1887,  the  inspection,  sampling, 
classing  and  weighing  of  all  cotton  delivered  upon  "futures" 
contracts  has  been  done  under  the  auspices  of  the  New  York 
Cotton  Exchange  and  under  the  supervision  of  the  inspector- 
in-chief  of  cotton,  an  officer  appointed  by  the  Exchange  "to  take 
entire  supervision  and  direction"  of  these  matters.  After  being 
inspected,  classed  and  weighed,  cotton  can  be  delivered  and 
redelivered  at  any  time  during  twelve  months  upon  the  original 
certificate  of  classification  and  weight  issued  by  the  inspector- 
in-chief. 

Cotton  intended  for  delivery  upon  New  York  "contracts"  is 
inspected,  sampled  and  weighed  under  the  personal  supervision 
of  an  assistant  inspector  of  cotton,  by  samplers  and  weighers 
duly  licensed  by  the  Exchange.  No  sampler  can  be  employed 
who  is  in  the  service  of  any  one  interested  in  the  cotton  to  be 
sampled. 

The  samples  are  submitted  to  the  Classification  Committee  of 
the  Cotton  Exchange,  who  determine  the  grade^  subject,  however, 
to  a  revision  by  that  committee  upon  appeal  by  any  party  inter- 
ested.    The  decision  reached  upon  this  revision  is  final. 

Not  less  than  two  members  of  the  Classification  Committee 
.are  competent  to  act  upon  an  original  classification,  and  upon  an 
appeal  from  their  decision  three  of  the  committee  of  six  must  act. 

The  members  of  the  Classification  Committee  are  salaried 
officers  of  the  Cotton  Exchange,  and  are  not  permitted  to  be 
^gaged   directly  or   indirectly   in   any  t^usiness   connect^cj   w^th 


cotton.  They  cannot,  therefore,  possibly  have  any  interest  what- 
ever in  the  cotton  submitted  to  them  for  classification.  The 
cotton  is  classed  bale  by  bale,  and  a  certificate  is  given  stating 
how  many  bales  there  are  of  each  grade  in  each  lot  or  class  mark. 

After  cotton  has  been  sampled  and  weighed,  negotiable  ware- 
house receipts,  stating  the  marks  of  bales  and  lot  numbers,  are 
issued  to  holders  of  cotton,  no  receipt  to  be  for  more  than  about 
lOO  bales  or  50,000  pounds. 

The  inspector-in-chief  of  cotton  has  entered  on  these  receipts 
the  weight  of  the  cotton  in  accordance  with  the  records  of  his 
office.  He  also  issues  a  certificate  stating  the  number  of  bales 
of  each  grade  in  accordance  with  the  decision  of  the  Classification 
Committee  or  the   Appeal   Committee  on   Classification. 

Negotiable  warehouse  receipts,  accompanied  by  the  inspector- 
in-chief's  certificate  of  grade  as  above  described,  constitute  a 
good  delivery  on  contracts  for  cotton  sold  for  future  delivery. 

The  weight  as  entered  by  the  inspector-in-chief  on  the  ware- 
house receipt  must  be  accepted  by  all  parties  for  one  year  from 
date  of  weighing,  subject  to  an  allowance  of  one-half  pound  per 
bale  per  month  or  fraction  of  a  month. 

The  Cotton  Exchange  Inspection  Fund  is  responsible  for  the 
correctness  of  the  certificates  issued  by  the  inspector-in-chief  as 
to  the  grade  of  cotton  certified  to,  but  the  claim  must  be  made 
within  one  year  after  the  date  of  the  certificate  upon  which  it  is 
based  and  before  the  cotton  leaves  the  port  of  New  York. 

The  Inspection  Fund  will  not  be  liable  for  loss  in  weight,  it 
being  considered  that  the  allowance  of  one-half  pound  per  bale 
per  month  will  cover  the  shrinkage. 

The  methods  of  procedure  when  New  York  contracts  for  future 
delivery  are  settled  by  the  delivery  of  the  cotton  are  as  follows: 

The  seller  sends  to  the  buyer  a  notice  naming  the  day  upon 
which  he  proposes  to  deliver  the  cotton,  such  notice  to  be  given 
not  less  than  three  days  prior  to  the  day  of  intended  delivery. 
If  the  buyer  has  also  sold  the  cotton  for  delivery  during  the 
same  month  for  which  he  has  received  notice,  it  is  usual  for 
him  to  transfer  the  notice  of  delivery  (by  proper  indorsement 
thereon)  to  the  party  to  whom  he  has  sold,  and  such  transfers 
are  made  until  3  p.m.  of  the  day  the  notice  is  issued,  or  until 
it^s  receipt  before  that  hour  by  a  party  who  has  bought  but  has 
not  sold,  or  who  desires  to  receive  the  cotton. 

The  last  party  who  receives  the  notice  receives  the  cotton  upon 
the  day  named  for  it's  delivery  from  the  party  who  issued  the 
riQtjce  of  delivery  and  pays   for  it   at  the  price   named   in   the 


transferable  order,  which  price  must  be  within  one-fourth  of  a 
cent  per  pound  of  the  market  price  of  spot  cotton  quoted  by  the 
Cotton  Exchange  on  the  day  before  issuing  the  order.  He  settles 
for  the  cotton  with  the  party  who  issued  the  order,  and  if  the 
price  is  less  than  his  contract,  he  pays  to  the  other  party  to 
his  contract  the  difference.  If,  however,  the  price  he  has  to  pay 
for  the  cotton  according  to  the  transferable  order  is  more  than 
the  price  in  his  contract,  then  the  other  party  to  the  contract 
sends  him  with  the  transferable  order  a  check  for  the  difference 
between  the  contract  price  and  the  price  named  in  the  trans- 
ferable order. 

The  notice  of  delivery  is  often  transferred  to  many  parties 
before  the  hour  (3  p.m.)  at  which  it's  circulation  ceases  under 
the  rules.  All  intermediate  parties  between  the  party  who  issues 
the  notice  of  delivery  and  the  party  who  receives  the  cotton  settle 
with  each  other  the  difference  between  their  respective  contracts 
and  the  price  of  the  transferable  order  upon  which  the  cotton 
is  finally  received  and  paid  for. 

By  this  method  the  actual  delivery  of  one  hundred  bales  of 
cotton  upon  a  single  contract  serves  to  effect  the  settlement  of 
many  contracts,  often  aggregating  as  much  as  3,000  bales. 

In  the  course  of  business  a  majority  of  the  contracts  are 
settled  before  the  month  of  their  maturity  and  without  actual 
delivery  of  cotton.  They  are  settled  by  "direct  settlements"  and 
"ring  settlements."  If  a  merchant  should  sell  for  a  client  (or  for 
himself)  a  contract  for  future  delivery  and  subsequently  buy 
for  another  client  (or  for  himself)  a  contract  for  delivery  in  the 
same  month  as  that  for  which  he  had  previously  sold,  and  if 
these  transactions  were  both  made  with  the  same  member  of  the 
Exchange,  a  direct  settlement  would  be  made  as  between  the 
two  members  of  the  Exchange,  as  the  subsequent  transaction 
would  be  an  offset  to,  and  act  as  a  "direct  settlement"  of,  the 
previous    transaction. 

"Ring  settlements"  of  contracts  are  made  in  the  following 
manner:  If  a  member  of  a  Cotton  Exchange  sells  100  bales  of 
cotton  for  future  delivery  and  the  party  to  whom  he  sells  has 
previously  sold  or  may  afterward  sell  to  another,  and  this  other 
has  previously  sold  or  may  afterward  sell  to  the  first  party,  all 
the  transactions  being  for  the  same  month  of  delivery,  then  the 
ascertainment  of  this  condition  of  trading  makes  a  settlement  of 
the  contracts  existing  between  all  three  of  the  parties,  which  is 
called  a  "ring  settlement."  Each  one  of  these  three  parties 
having  bought  and  sold  futures  for  the  same  month's  delivery^ 


has  no  interest  in  the  matter  beyond  the  difference  between 
the  price  at  which  he  bought  and  the  price  at  which  he  sold.  The 
"ring  settlement"  enables  them  to  liquidate  their  contracts  of 
purchase  and  of  sale  and  to  realize  the  profit  or  loss  upon  the 
transaction  long  before  the  month  of  delivery  stipulated  in  the 
contracts.  The  "ring  settlements"  usually  embrace  more  than 
three  parties,  and  frequently  twelve  or  more. 

During  the  previous  and  the  present  session  of  Congress  several 
bills  have  been  introduced  to  virtually  prevent  the  dealing  in 
cotton  for  future  delivery  as  now  transacted  on  the  New  York 
and    New    Orleans    Cotton    Exchanges. 

The  well-known  facts  that  the  more  persons  who  trade  in  and 
are  thus  interested  in  the  value  of  any  commodity,  the  more 
active  the  business,  and  that  active  markets  make  good  prices, 
seem  to  have  been  entirely  overlooked  in  the  eagerness  to  enact 
prohibitive  legislation.  It  was  also  forgotten  that  the  fewer  the 
buyers,  the  lower  the  price. 

The  personal  conclusions  expressed  in  this  article  are  based 
upon  impartial  and  thorough  investigation.  My  own  convictions 
respecting  the  benefit  of  the  future  delivery  system  to  all  inter- 
ested in  cotton — from  the  farm  to  the  factory — have  recently 
been  fortified  by  letters  received  from  many  prominent  merchants 
and  bankers. 

Alfred  B.  Shepperson. 

New  York,  June  8,  191 1. 


INMAN,  NELMS  &  CO. 

Houston,  Texas,  March  13,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  In  response  to  your  letter  of  8th  inst.,  we  wish  to 
state  that  the  ''futures"  markets  are  an  absolute  necessity  to  pro- 
tect our  trades  and  obviate  speculation. 

If  the  Scott  Anti-Option  Bill  should  become  a  law  it  would 
mean  a  great  calamity  to  the  cotton  industry  and  hamper  legiti- 
mate business,  which  can  now  be  transacted  with  safety  and  in 
large  proportions  by  the  protection  of  the  ''futures"  markets. 
Furthermore,  we  would  be  forced  to  buy  our  spot  cotton  on  a 
much  wider  margin  in  order  to  protect  ourselves,  while  now  the 
farmer  is  benefited  by  securing  this  additional  price,  which  would 
otherwise  be  absorbed  in  the  margin  if  this  Bill  should  be  passed. 

Yours  truly, 

Inman,  Nelms  &  Co. 


BRYAN  heard  A.  W.  POLLARD 

HEARD     &      POLLARD 
Cotton  Merchants 
Cable  address  "Heard  Houston." 

Houston,  Texas,  March  18,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  We  do  not  hesitate  to  say  that  the  opportunity  to 
buy  and  sell  cotton  "futures"  through  our  Cotton  Exchanges  is  a 
facility  that  is  a  distinct  advantage  to  the  operation  of  the  cotton 
merchandise  business.  In  our  judgment  there  is  one  point  in  the 
discussion  of  the  anti-option  legislation  which  has  not  been  fully 
brought  out;  and  that  is  that  a  cotton  merchant  reckons  his 
profit  at  a  smaller  percentage  in  the  turnover  than  merchants  in 
any  other  line  of  trade  in  the  country.  Many  retail  merchants 
reckon  their  profit  at,  say,  as  high  as  50%  ;  some  higher  and  some 
lower.  Wholesalers  will  figure  that  they  are  doing  a  bad  business 
if  they  can't  count  their  profit  at  10%.  In  contradistinction  to 
this,  a  cotton  merchant  thinks  he  is  doing  a  big  business  if  he 
can  count  his  profit  at  1%.  He  is  enabled  to  figure  so  closely  by 
reason  of  having  so  near  at  hand  a  means  of  hedging  and  pro- 
tecting himself  with  "futures"  contracts,  thereby  reducing  his 
risks  to  a  minimum.  In  the  ordinary  operation  of  the  business 
one  usually  buys  before  he  sells  or  sells  before  he  buys.  In  either 
case,  if  left  wide  open,  it  wou}4  involve  business  rjsl^s  which 


prudent  men  will  not  take  and  which  our  financial  institutions 
would  not  countenance;  but,  having  constantly  in  hand  a  means 
of  covering  makes  the  hedging  system  an  almost  indispensable  help 
to  the  business.  If  deprived  of  this  facility  it  would  mean  a  com- 
plete tearing  up  and  reorganization  of  the  business.  We  do  not 
believe  there  is  anybody  in  the  trade  who  would  not  like  to  see 
some  regulation  that  would  eradicate  those  who  deal  in  cotton 
"futures"  strictly  as  a  gambling  or  speculating  medium,  but  if 
legislation  is  enacted  that  is  sufficiently  drastic  to  eradicate  that 
evil,  then  it  would  certainly  have  an  effect  upon  the  cotton  mer- 
chandise business  not  anticipated  by  those  who  see  nothing  in 
cotton  "futures"  but  gambling. 

We  believe  that  the  Cotton  Exchanges  and  the  cotton  trade 
generally  make  a  mistake  in  sitting  by  and  presuming  upon  the 
safety  of  the  Exchanges  and  our  cotton  contract  facilities  until 
the  last  moment,  when  we  awaken  to  find  a  bill  like  the  "Scott 
Bill"  is  about  to  be  railroaded  through  Congress.  Then  there  is 
a  wild  rush  and  an  avalanche  of  protest  to  Washington.  In  our 
opinion  the  Exchanges  and  the  trade  should  call  some  sort  of  a 
general  convention  for  a  discussion  of  the  anti-option  legislation 
and  be  in  a  position,  when  we  protest  to  our  law-makers  against 
the  passage  of  such  a  drastic  bill  as  the  "Scott  Bill,"  to  offer  them 
something  that  would  as  far  as  possible  reach  the  evil  they  are 
after,  that  is  the  dealing  in  cotton  "futures"  as  a  medium  for 
gambling  and  manipulation  only. 

Yours  very  truly, 

Heard  &  Pollard. 


H.  L.  EDWARDS  F.  P.   WEBSTER  F.   J.  PHILLIPS 

H.  L.  EDWARDS  &  CO. 
Cotton  Merchants 
Cable  address  "Edwards." 

Dallas,  Texas,  March  ii,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y, 

Dear  Sir:  Replying  to  your  favor  of  the  8th  inst.,  will  say  that 
we  consider  it  not  only  a  great  convenience,  but  at  times  an  abso- 
lute necessity  in  order  to  avoid  speculation,  for  our  firm  to  buy  or 
sell  cotton  "futures"  on  the  exchanges  of  New  York  and  New 
Orleans  against  purchases  or  sales  they  make  of  spot  cotton. 

Yours  very  truly, 

H.  L.  Edwards  &  Co. 


Cable  Address  Buying  Agencies 

•Telder"  Dallas  Terrell,  Texas        Ft.  Worth,  Texas 

Greenville,  Texas  Gainesville,  Texas 
Ennis,  Texas         McKinney,   Texas 
Waxahachie,  Texas  Paris,   Texas 
Alvarado,  Texas    Chickasha,    Okla. 
Hillsboro,  Texas   Ada,  Okla. 

W.  D.  FELDER  &  COMPANY 
COTTON 
Dallas,  Texas,  March  lo,  1911. 

Mr.  Alfred  B.  S  hep  person,  Nezv  York,  N.  Y. 

Dear  Sir  :  In  reply  to  yours  of  March  7th,  beg  to  state  that  if 
we  were  not  allowed  to  hedge  our  sales  with  ''futures"  contracts, 
either  in  New  York,  New  Orleans  or  Liverpool,  that  it  would 
curtail  our  business  considerably:  we  think  fully  fifty  per  cent. 
At  present  we  will  buy  a  few  thousand  bales  of  spot  cotton,  and 
if  we  do  not  have  a  place  for  it,  sell  "futures"  against  the  same 
as  a  hedge,  and  in  the  summer  months,  when  there  is  no  spot  cot- 
ton in  the  interior  for  future  shipments,  we  sell  a  few  thousand 
bales  of  "spots"  and  buy  a  like  number  of  "futures."  If  it  were 
not  for  the  protection  we  secure  in  the  "futures"  market  these 
forward  sales  would  not  be  made  by  us,  and  on  the  other  hand, 
we  would  never  buy  spot  cotton  unless  we  had  an  order  in  hand 
for  the  same.  We  are  sure  it  would  be  very  bad  for  the  South  if 
the  New  York  and  New  Orleans  Cotton  Exchanges  were  put  out 
of  business,  but  on  the  other  hand  we  believe  that  we  would  be 
able  to  make  a  much  larger  margin  of  profit  on  the  actual  business 
we  did,  if  the  exchanges  were  eliminated. 

Yours  very  truly, 

W.  D.  Feeder  &  Co. 


BUSH  &  WITHERSPOON  CO. 

COTTON 

Waco,  Texas,  March  31,  191 1. 

Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir:  We  beg  to  say  most  emphatically  that  the  oppor- 
tunity to  buy  and  sell  "futures"  in  both  Cotton  Exchanges  of  New 
York  and  New  Orleans  is  of  unlimited  value  to  us;  first  by  reason 
of  the  fact  that  where  we  m?ike  a  sale  pf  spot  cotton  for  ftjtur? 


shipment  to  merchants  or  spinners,  domestic  or  foreign,  by  pur- 
chasing ''futures"  as  a  hedge,  this  hedge  to  be  held  until  we  can 
buy  in  the  actual  spot  cotton  for  shipment,  then  closing  out  our 
future  hedge;  secondly,  where  our  farmer  and  merchant  friends 
are  daily  offering  us  ''spot  cotton"  for  sale  we  are  able  to  pur- 
chase their  offerings  even  without  actual  "spot"  orders  and  sell 
"futures"  in  either  New  York  or  New  Orleans  as  a  hedge,  keep- 
ing this  "futures"  hedge  until  the  actual  "spot  cotton"  has  been 
sold  to  domestic  mills  or  foreign  buyers.  Therefore  without 
the  means  of  the  "futures"  market  as  a  hedge  against  purchases 
and  sales  of  spot  cotton  it  would  be  practically  impossible  to  carry 
on  a  cotton  business  successfully. 

This  means  of  protection  is  not  only  for  ourselves,  but  also  for 
our  banking  friends  who  are  kind  enough  to  advance  payment 
against  cotton  purchased  and  is  also  a  protection  to  the  domestic 
mills  or  foreign  buyers  to  whom  we  sell  forward  shipments. 

Yours  very  truly. 

Bush  &  Witherspoon  Co. 


FELIX  P.  BATH  &  CO. 

Cotton  Merchants 
Houston,  Texas 
Oklahoma  City,  Okla. 

Fort  Worth,  Texas,  March  24,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  In  our  judgment,  the  advantages  of  the  protection 
to  cover  purchases  of  Spot-Cotton  immediately  they  are  made,  as 
vice  versa  of  sales,  against  even  only  ordinary  fluctuations  as 
absolutely  afforded  under  the  present  system  prevalent  on  the 
New  York  and  New  Orleans  Cotton  Exchanges,  are  of  inesti- 
mable value  and  to  legitimate  operators  of  spot-cotton  like  our- 
selves, practically  the  mainstay  of  the  business. 

We  cannot  conceive  and  do  not  contemplate  any  other  course 
and  effect  to  follow,  should  the  present  system  of  trading  on  the 
Cotton  Exchanges  be  abolished,  or  so  hampered  by  being  un- 
duly controlled,  than  to  hinder  and  perhaps  neutralize  the  facili- 
ties it  now  affords  to  legitimate  Spot-Cotton  operators,  to  con- 
formingly  minimize  the  latters'  ranks  and  thus  eliminate  so  much 
valued  competition,  and  then  to  materially  reduce  the  basis  of 
value  of  the  fibre  to  the  producer,  the  latter,  obviously,  a  condition 
sine  qu^  non.     In  adtjition,  it  ^lust  and  wijl  tend  to  extend  thf 


line  of  speculatively  inclined  Spinners,  if  not  create  a  fresh  order 
of  speculators  among  them,  as  also  among  the  producers,  so 
hazardous  to  their  welfare. 

Only  as  a  result  of  the  facilities  of  this  absolute  protection 
against  fluctuations,  which  the  present  system  of  operating  on  the 
Exchanges,  as  above  indicated,  so  freely  affords,  the  very  large 
crops  of  cotton  may  and  are  now  being  marketed  by  the  planters, 
pretty  much  in  their  entirety,  without  the  least  cost  to  them  for 
an  allowance  of  a  margin  that  would  certainly  be  involved  to 
cover  likely  fluctuations,  to  which  all  such  commodities  are  more 
or  less  subjected. 

We  trust  the  misapprehension,  in  which  the  situation  is  being 
so  unduly  viewed,  may  be  cleared  away  in  good  time  and  with- 
out damage. 

Yours  very  truly, 

Felix  P.  Bath  &  Co. 


MORTIMORE  &  CO. 

COTTON 
Greenville,  Texas,  March  30,  1911. 

Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir  :  Replying  to  your  favor  of  the  27th  inst.,  respecting 
the  use  of  "futures"  in  New  York  and  at  New  Orleans,  we  would 
say  that  we  hardly  know  how  the  Cotton  business  could  be  safely 
handled  without  them.  Certainly  were  they  abolished  we  should 
cover  instead  in  Liverpool. 

If  the  law  in  some  way  prevented  us  from  covering,  the  only 
recourse  we  should  have  would  be  to  buy  with  a  larger  margin  to 
allow  for  the  added  risks.  At  present  the  trade  knows  that  it  can 
hedge  itself  at  a  moment's  notice  and  buys  on  that  basis.  If  it 
knows  that  it  cannot  so  hedge  then  it  will  have  to  buy  cheaper  to 
protect  itself  against  loss.  Small  concerns  also  would  be  put  out 
of  business,  as  banks  would  consider  the  cotton  business  too 
speculative  with  the  opportunity  to  hedge  in  part  done  away  with. 
They  would  thus  require  a  larger  margin  per  bale.  Many  firms 
could  not  give  this  margin,  and  competition  would  be  reduced 
at  very  considerable  loss  to  the  farmer. 

Yours  very  truly, 

Mortimore  &  Co. 


WILD  &  ORME 
Paris,  Texas  and  Memphis,  Tenn. 

Paris,  Texas,  March  28,  191 1. 
Mr.  Alfred  B.  S  hep  person,  Nezv  York,  N.  Y. 

Dear  Sir:  Replying  to  your  favor  of  the  25th  inst.,  in  which 
you  ask  us  if  the  facilities  for  buying  and  selling  cotton  for  fu- 
ture delivery  on  the  New  York  and  New  Orleans  Cotton  Ex- 
changes are  of  service  in  our  business.  We  would  say  that  they 
are  under  our  present  system  of  doing  business  absolutely  neces- 
sary to  protect  us  against  loss.  If  we  could  not  cover  our  sales 
to  spinners  for  future  delivery  with  contracts  on  the  New  York 
or  New  Orleans  Cotton  Exchanges,  it  would  change  our  method 
of  doing  business  entirely  and  force  us  to  figure  on  a  much  larger 
margin  for  profits  than  we  now  do.  As  we  conduct  our  business 
at  present  we  can  afford  to  handle  cotton  on  a  small  margin,  that 
is  of  course,  from  the  reason  that  we  can  buy  "futures"  at  the 
same  time  that  we  sell  the  cotton,  thereby  guaranteeing  our  profit. 
If  these  facilities  for  hedging  sales  of  spot  cotton  on  the  New 
York  and  New  Orleans  Cotton  Exchanges  are  done  away  with, 
necessarily  we  would  have  to  buy  Cotton  much  cheaper,  and  then 
not  be  sure  that  we  were  amply  protected,  and  that  necessarily 
would  mean  a  much  lower  price  to  the  producer. 

Yours  very  truly. 

Wild  &  Orme. 


F.  G.  SMITH  &  CO. 
Cable  address  *'Fieldsmith." 
'-••"'"  Cotton  Commission 

Of  Austin,  Texas        Shreveport,  La. 

Austin,  Texas,  March  13,  191 1. 
Mr.  Alfred  B.  S  hep  person,  New  York,  N.   Y. 

Dear  Sir:  We  beg  to  say  that  we  do  not  know  how  the  for- 
ward business  could  be  done  in  spot  cotton  without  the  "fu- 
tures" markets  to  hedge  in,  for  it  would  be  a  rank  gamble  on  the 
part  of  southern  shippers  to  sell  forward  deliveries  without  being 
able  to  buy  "futures"  in  the  American  markets  to  protect  them- 
selves. The  worst  feature  we  see  in  doing  away  with  the  "fu- 
tures" markets  would  be  that  buyers  of  spot  cotton  in  the  South 
would  not  be  granted  accommodation  by  the  banks,  unless  they 
were  in  a   position  to   show  to  the  banks  that   they  could  sell 


''futures"  against  their  ''overs"  or  long  cotton.  Now,  the  busi- 
ness may  in  some  way  be  done  without  "futures"  as  a  protection, 
but  we  believe  that  a  majority  of  the  houses  that  have  tried  to 
do  business  without  "futures"  protection  have  either  gone  to  the 
wall,  or  they  are  practically  broke,  for  we  know  that  it  is  a  hard 
matter  to  get  a  fair  return  on  the  money  invested,  even  with  the 
"futures"  protection.  As  far  as  we  are  concerned,  we  would  not 
attempt  to  do  any  forward  business  at  all,  unless  we  had  the 
"futures"  protection. 

Yours  very  truly, 

F.  G.  Smith  &  Co. 


H.  KEMPNER 

Established  in  1868 

Cotton  and  Banking 

Galveston,  Texas,  April  22,  191 1. 

Mr.  Alfred  B.  Shep person,  Nezv  York,  N.   Y. 

Dear  Sir:  We  are  in  receipt  of  yours  of  the  i8th.  The  facili- 
ties for  buying  and  selling  cotton  for  future  delivery  on  the  New 
York  and  New  Orleans  Cotton  Exchanges  are  of  decided  service 
to  us,  as  a  protection  against  advances  or  declines  in  prices  before 
we  secure  the  actual  spot  cotton,  which  we  may  sell  for  deferred 
delivery,  and  also  as  a  hedge  against  cotton,  which  we  have  pur- 
chased in  anticipation  of  orders. 

The  abolition  of  such  facilities  or  concentrating  them  in  the 
foreign  markets,  such  as  Liverpool  and  Havre,  would  be  a  menace 
to  the  entire  cotton  trade  of  this  country,  and,  in  our  opinion, 
permit  cotton  to  be  controlled  by  a  trust  or  aggregation  of  capital 
as  thoroughly  as  oil,  packing  house  products,  sugar,  etc.,  are 
to-day. 

Yours  truly, 

H.  Kempner. 


WELD-NEVILLE  COTTON  COMPANY 
(Incorporated)  Capital,  $100,000. 

Houston,  Texas,  April  18,  1911. 

Mr.  Alfred  B.  Shep person,  Nezv  York,  N.   Y. 

Dear  Sir:  Replying  to  your  letter  of  April  nth,  we  would 
state  that  the  facilities  for  buying  and  selling  cotton  "futures" 
are  of  very  great  service  to  us  in  our  business. 


8 

We  are  obliged  to  use  the  purchase  and  sale  of  "futures"  as  a 
hedge  (protection)  and  they  enable  us  to  be  in  the  market  every 
day  and  at  all  times  for  cotton.  Were  we  to  depend  entirely 
on  demand  from  spinners  for  cotton,  we  fear  we  should  have  to 
do  a  very  much  smaller  business,  and  work  on  a  much  larger 
margin  of  profit  than  is  now  the  case.  Besides  we  should  likely 
not  be  in  the  market  a  great  deal  of  the  time,  as  we  certainly" 
would  not  buy  cotton  unless  we  had  a  place  for  it. 

Yours  very  truly, 

A  C.  Cairns, 

Vice-Pres't. 


ROBARDS  COTTON  CO. 

San  Antonio,  Texas,  April  17,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 
Dear  Sir:    Your  favor  of  nth  inst.  is  received. 
We  beg  to  say  that  we  regard  the  facilities  afforded  by  the 
New  York  and  New  Orleans  Cotton  Exchanges,  for  "hedging" 
cotton  either  in  stock  or  sold   for  forward  shipment,   as  indis- 
pensable to  any  prudent  person  or  firm  engaged  in  the  spot  cotton 
business.    Liverpool  would  give  no  adequate  relief  in  that  line,  as 
that  market  is  open  only  about  an  hour  of  our  business  day,  and 
if  there  were  no  American  "Futures"  markets,  prices  would  be 
subject  to  violent  and  dangerous  fluctuations. 

Very  truly  yours, 

Robards  Cotton  Co. 

W.  C.  Robards,  President. 


R  C.  OLDS  &  COMPANY 
COTTON 
Abilene,  Texas,  March  10,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir  :  We  beg  to  advise  that  we  hardly  see  how  we  could 
get  along  without  the  Cotton  Exchanges  of  New  York  and  New 
Orleans  to  hedge   (protect)   our  spot  cotton  transactions  in. 

Yours  very  truly, 

F.  C.  Olds  &  Company. 


COPY    OF    TELEGRAM    SENT    TO    HON.    JOSEPH    W. 

BAILEY    AND    HON.    C.    A.    CULBERSON,    UNITED 

STATES    SENATORS    FROM    TEXAS,    BY    THE 

GAINESVILLE   (TEX.)    COTTON  EXCHANGE 

ON  FEBRUARY  15,  191 1 

We  are  informed  that  the  Scott  Anti-Option  Bill,  that  elim- 
inates hedging  on  New  York  and  New  Orleans  Cotton  Exchanges, 
will  possibly  pass  the  Senate.  We  think  this  bill  is  against  the 
interest  of  the  cotton  men  of  the  South,  both  farmers  and  buyers, 
and  will  leave  the  regulation  of  prices  largely  to  mills  and  the 
Liverpool  Cotton  Exchange. 

(Signed) 
W.  V.  Hancock 
L.  C.  Shegogg 
J.  B.  Hill 
J.  P.  Critz 
I.  Beasley 
Val.  Peers 
S.  F.  Zacharias 

Members   of  Gainesville   Cotton   Exchange. 


E.  D.  McCaa 
R.  T.  Moodie 
C.  J.  O'Neal 
T.  L.  Liddell 

F.  C.  Cooper 
H.  E.  Wilson 
S.  Zacharias 


H.  Perdue 

R.  J.  TiMMIS 

C.  Guy  Dukinfield 
Keel  &  Son 
R.  S.  Rose 
Lloyd  Bowers 


WILSON  &  MOODIE 
COTTON 

Gainesville,  Texas,  April  6,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N,  Y. 

Dear  Sir  :  Your  letter  of  the  3rd  inst.  to  hand.  The  ability  to 
use  the  services  of  the  New  York  and  New  Orleans  Cotton  Ex- 
changes is  of  great  benefit  to  us  in  order  to  safeguard  our  busi- 
ness and  minimize  our  risk.  We  buy  '"futures"  for  the  purpose 
of  protecting  us  against  loss  on  sales  we  may  make  for  deferred 
shipments,  and  sell  "futures"  to  protect  us  against  loss  on  cotton 
we  may  have  on  hand.  The  absence  of  such  facilities  for  hedg- 
ing would  render  our  business  hazardous  in  the  extreme  and  were 
Liverpool  the  only  hedge  market  open  to  us  we  think  our  risk 
would  be  increased. 

Yours  truly, 

Wilson  &  Moodie. 


10 

E.  S.  FLINT  &  CO. 

COTTON 

Galveston,  Texas,  April  29,  191 1. 
Mr,  Alfred  B.  S  hep  person.  New  York,  N.   Y. 

Dear  Sir:  Replying  to  your  recent  communication,  will  say 
that  the  ''covers"  afforded  us  by  the  "futures"  markets  of  both 
New  Orleans  and  New  York  are  of  the  greatest  protection  and 
service  to  us  in  the  operation  of  our  spot  cotton  business.  In 
fact,  as  the  business  is  conducted  to-day  such  protection  is  prac- 
tically indispensable. 

Yours  very  truly, 
E.  S.  Flint  &  Co. 


MULLER  &   CO. 

COTTON    EXPORTERS 

Galveston,  Texas,  April  26,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  F. 

Dear  Sir:  We  have  your  favor  of  the  i8th  inst,  and  in  reply 
beg  to  say  that  the  facilities  for  buying  and  selling  "cotton 
futures"  on  the  New  York  and  New  Orleans  Cotton  Exchanges 
are  of  incalculable  service  in  our  business.  Modern  business 
methods  make  the  "futures"  contract  markets  an  absolute  neces- 
sity, they  being  the  only  protection  we  have  against  an  advance 
in  prices  when  we  have  to  make  sales  for  forward  shipments 
before  being  able  to  secure  the  actual  cotton  and  again  against 
cotton  we  have  to  buy  in  anticipation  of  orders.  Without  a 
chance  of  "hedging"  (protecting)  purchases  or  sales  by  "futures" 
contracts,  spot  cotton  business  would  be  impossible. 

Yours  very  truly, 

Muller  &  Co. 


THE  EUSTACE  TAYLOR  COTTON  COMPANY 

Galveston,  Texas,  April  24,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir  :  Yours  of  the  i8th  inst.  received,  and  in  reply  would 
state  that  all  prices  for  buying  or  selling  cotton  are  on  the  basis 
of  "futures."    Therefore  the  New  York  and  New  Orleans  markets 
for  "cotton  futures"  are  essential  to  such  transactions. 
'Yours  truly, 

Eustace  Taylor,  Pres't  and  Mgr. 


II 

JAS.  S.  PATTESON  &  CO. 

Cable  address  "Patteson." 

COTTON 

Memphis,  Tenn.,  March  ii,  191 1. 

Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir:  In  reply  to  your  inquiry  of  8th  inst.,  will  say  that 
we  could  not  conduct  our  business  without  the  aid  of  the  New 
York  Cotton  Exchange,  as  we  hedge  all  of  our  transactions  im- 
mediately. It  would  be  impossible  for  us  to  make  any  forward 
sales  of  spot  cotton  without  the  use  of  it. 

Very  truly  yours, 

Jas.  S.  Patteson  &  Co. 


F.    M.    CRUMP  D.    H.    CRUMP 

F.  M.  CRUMP  &  CO. 

COTTON 

Branch  Office,  Cable  Address, 

Crump  &  Britton,  *'Millington." 

Helena,  Ark. 

14  So.  Front  Street 

Memphis,  U.  S.  A.,  March  23,  191 1. 

Mr.  Alfred  B.  S  hep  person,  New  York,  N.  Y. 

Dear  Sir:  In  reply  to  your  favor  of  the  21st  inst.,  the  facili- 
ties for  buying  and  selling  cotton  for  future  delivery  on  the  Cot- 
ton Exchanges  of  New  York  and  New  Orleans  are  not  only  a 
great  protection  to  us  in  the  necessary  conduct*  of  our  business 
along  legitimate  lines  but,  in  our  opinion,  are  absolutely  necessary 
to  the  safe  conduct  of  the  cotton  business.  If  these  facilities  were 
denied  us  it  would  mean  a  complete  revolution  in  the  methods  of 
handling  the  cotton  business  and  we  think  that  the  absence  of 
these  facilities  would  work  a  hardship  on  every  one  connected 
with  the  cotton  business  including  the  cotton  grower. 

Yours  very  truly, 

F.  M.  Crump  &  Co. 


COATE  BROS. 

Memphis,  Tenn.  Galveston,  Tex. 

New  Orleans,  La.  Ft.  Worth,  Tex. 

Cotton  and  Cotton  Seed  Products 
12  N.  Front  St. 

Memphis,  Tenn.,  March  i8,  191 1. 
Mr.  Alfred  B.  S  hep  person,  Nezv  York,  N.  Y. 

Dear  Sir:    Replying  to  your  favor  8th  inst. 

We  do  almost  exclusively  a  spot  cotton,  non-speculative  busi- 
ness. This  would  be  an  impossibility  if  there  were  no  future 
delivery  business  in  either  New  Orleans,  New  York  or  Liverpool. 
Without  "futures,"  even  if  willing  to  go  into  the  speculation  of 
buying  spot  cotton  when  we  considered  it  cheap  and  selling  it 
when  we  considered  it  dear,  we  must  reduce  our  business  to  very 
small  proportions,  or  obtain  very  much  larger  capital.  We  could 
still  continue  our  small  mill  order  business,  but  we  find  these 
orders  come  at  the  same  time  as  orders  to  all  other  cotton  men. 
If,  to  avoid  speculation,  we  were  obliged  to  buy  immediately  on 
receipt  of  the  order  in  competition  with  other  buyers,  there  would 
be  much  more  violent  fluctuations  than  there  are  now  in  small 
manipulated  crop  seasons.  We  make  our  profits  by  buying  cotton 
when  mills  are  not  in  the  market,  hedging  it  with  "futures'*  and 
waiting  for  the  demand  to  spring  up.  In  other  words,  when  cot- 
ton is  cheap  relative  to  "futures,"  and  other  conditions — such  as 
carrying  premiums — are  right,  we  buy  and  hold  until  spot  cot- 
ton advances  relative  to  "futures."  We  may  have  poor  business 
judgment  and  buy  at  the  wrong  time,  but  our  loss  is  relatively 
small,  consequently  bankers  consider  us  a  good  risk  and  give  us 
a  credit  far  in  excess  of  what  they  would  give  were  we  buying 
timber,  dry  goods,  sugar,  rice,  etc.  The  advantage  of  doing  this 
large  business  over  investing  in  a  small  amount  of  cotton  for  a 
speculative  rise»  is  that  we  are  able  to  buy  all  various  grades  and 
staples  as  they  come  from  the  plantation.  We  class  this  out  into 
even  running  lots  of  one  grade  and  one  staple,  and  sell  any  mill 
just  the  grade  which  suits  it  best.  It  is  the  existence  of  firms 
doing  this  same  business  which  enables  any  farmer,  to  sell  any 
style  of  cotton,  on  any  day  of  the  year,  for  cash.  We  are  the 
balance  wheel  which  forces  the  speculator  to  carry  the  stock  of 
the  world  if  he  bids  too  high,  or  forces  the  speculator  to  de- 
liver actual  cotton  against  his  contracts  if  he  sells  too  low. 

As  long  as  the  world  exists  some  men  will  speculate.     They 


13 

will  buy  land,  flour,  provisions,  cotton  or  anything  when  they 
think  it  cheap,  and  will  sell  when  they  think  it  dear.  The  present 
system  of  "futures"  contracts  utilizes  this  speculation,  and  puts 
it  in  a  form  which  can  be  utilized  to  protect  the  expert  and 
allow  him  without  danger  of  serious  loss,  to  concentrate  com- 
modities and  sell  the  consumer  just  the  grade  of  goods  he  re- 
quires. Let  the  average  mill  try  dealing  direct  with  the  average 
farmer,  taking  his  total  crop,  or  even  let  the  average  mill  buy 
gin  run  from  the  ginners  and  he  will  soon  call  out  for  a  mid- 
dle man  to  take  what  the  mill  cannot  use.  If  the  middle  man 
only  handles  a  few  hundred  bales  in  a  year,  he  can  do  little 
better  for  the  mill  than  the  farmer  or  the  ginner.  But  if  by 
hedging  his  purchases  he  receives  a  large  credit  from  the  banks, 
he  is  enabled  to  carry  large  quantities  of  cotton,  deal  with  large 
number  of  mills,  and  supply  each  with  the  exact  style  required. 
There  are  many  firms  with  small  capital  which  receive  large 
credits  from  London  banks,  because  they  undertake  to  keep  all 
their  cotton  strictly  covered  with  ''futures."  The  time  has  come 
when  American  banks  are  demanding  the  same  protection. 

Three  quarters  of  our  business  would  not  exist  if  the  "fu- 
tures" markets  w^ere  stopped,  we  therefore  reply  that  the  oppor- 
tunity to  buy  and  sell  cotton  for  future  delivery  on  the  Cotton 
Exchanges  of  New  York  and  New  Orleans  is  of  vital  service 
in  our  business. 

Yours  truly, 

CoATE  Bros. 


Copy  of  letter  sent  to  Hon.  Joseph  W.  Bailey  and  Hon.  C.  A. 

Culberson,  United  States  Senators  from  Texas,  and 

to  Hon.  R.  L.  Henry,  Member  of  United  States 

House  of  Representatives  from  Texas. 

(Printed  by  permission   of   Bush  &  Witherspoon   Co.) 

Waco,  Texas,  March  i8,  1911. 
Dear  Sir:  We  are  positive  that  you  have  been  informed  by 
many  others  as  to  the  great  disaster  that  would  be  brought  upon 
the  Southern  merchants,  planters,  bankers,  and  cotton  men  with 
the  passage  of  the  Scott  Anti-Option  Bill. 

Any  such  Bill  as  outlined  would  mean  untold  loss  to  the 
planters,  as  the  price  of  this  commodity  would  be  dictated  by 
Europe  solely,  and  the  farmers  wpuld  repeive  such  a  price  ^s  thp 


14 

spinners  cared  to  pay.  The  merchants  on  the  other  hand  would 
be  forced  to  hesitate  in  making  advancements  or  in  advancing 
supplies  to  their  customers,  knowing  the  cotton  would  be  sold 
only  at  a  cheap  price.  The  bankers  would  hesitate  to  lend  their 
money  and  would  not  advance  payment  for  cotton  as  is  now  the 
case,  realizing  that  those  who  purchase  cotton  would  have  no 
means  of  protection  without  the  "futures"  market.  The  buyer  could 
not  protect  himself  and  the  banker  is  not  in  the  position  of 
advancing  money  without  protection. 

We,  like  all  cotton  men  of  the  South  and  elsewhere,  would 
be  without  protection  on  our  spot  purchases,  being  unable  to 
sell  "futures"  against  them  or  unable  to  purchase  "futures" 
against  sales  of  spot  cotton.  Therefore  for  the  good  of  all  con- 
cerned we  respectfully  request  and  urge  upon  you  to  use  your 
efforts  in  defeating  any  such  anti-option  bill. 

Yours  very  truly, 

Bush  &  Witherspoon  Co. 


FORT  WORTH  GRAIN  AND  COTTON  EXCHANGE 

Fort  Worth,  Texas 

Copy  of  telegram  sent  to  Hon.  Jos.  W.  Bailey  and  Hon.  C.  A. 

Culberson,  United  States  Senators  from  Texas, 

on  February  15,  191 1 

(Printed  by  permission  of  Mr.  Felix  P.  Bath) 

It  is  the  sense  of  the  members  of  the  Forth  Worth  Grain  and 
Cotton  Exchange  after  considerable  deliberation  of  the  Scott 
Anti-Option  Bill  now  under  consideration  of  Committee  on  Inter- 
State  Commerce,  that  its  features  are  greatly  detrimental  and 
inimical  to  the  cotton  producers  of  the  South  and  conformingly 
to  our  interests  generally.  We  urgently  request  that  you  give  this 
serious  consideration  and  protest  against  it  as  a  measure.  If  ever 
enacted  into  a  law  it  can  only  tend  to  centralize  the  business  of 
dealing  in  these  commodities  to  a  very  few  European  combina- 
tions. 

(signed)  Fort  Worth  Grain  &  Cotton  Exchange. 

M.  E.  Berney, 
Tom  B.  Owens, 
Felix  P.  Bath, 
Julian  A.  Ivy. 

Committee, 


W.  C.  CRAIG  &  CO. 
Cotton  Buyers 

ViCKSBURG,  Miss.,   March  lo,  191 1. 
Mr.  Alfred  B.  S  hep  person,  Nezv  York,  N.  Y. 

Dear  Sir  :  We  have  your  favor  of  the  7th  inst.,  asking  whether 
the  opportunity  to  buy  and  sell  cotton  for  future  delivery  on  the 
Cotton  Exchanges  of  New  York  and  New  Orleans  is  of  service  in 
our  business  as  a  protection  against  an  advance  in  price  in  the 
event  of  our  making  sales  for  shipment  several  months  in  the 
future.  In  reply  we  have  to  say  that  the  opportunity  to  buy  and 
sell  for  future  delivery  on  the  Exchanges,  as  described  by  you, 
is  of  the  very  greatest  value  to  us  and  is  frequently  used  and 
that  we  should  have  to  adopt  different  methods  of  business  if 
the  opportunity  to  hedge  in  this  manner  were  taken  away.  With- 
out the  ''futures"  market  we  could  buy  spot  cotton  safely  only  on 
days  when  we  had  a  firm  offer  from  a  spinner  and  we  could 
sell  spot  cotton  to  a  spinner  only  when  we  happened  to  own  that 
^  particular  quality  or  when  we  knew  exactly  where  and  at  what 
price  we  could  immediately  buy  that  particular  quality. 

Yours  very  truly, 

W.  C.  Craig  &  Co. 


MEMBERS    NEW   ORLEANS    COTTON   EXCHANGE 
ASSOCIATE   MEMBERS  LIVERPOOL  COTTON   ASSOCIATION 

W.  J.  DAVIS  &  CO. 

Cotton  Merchants 
Cable  address  ''Davisco." 

Jackson,  Miss.,  U.  S.  A.,  March  29,  191 1. 
Mr.  Alfred  B.  She p person.,  New  York,  N.  Y. 

Dear  Sir:  Replying  to  your  valued  favor  of  the  24th  inst., 
requesting  that  we  write  you  if  the  facilities  for  buying  and  sell- 
ing cotton  for  future  delivery  are  of  service  in  our  business  as  a 
protection  against  the  advance  in  price,  where  cotton  is  sold  fqr 
later  shipment: 

Beg  to  advise  that  without  the  "futures"  market,  we  would 
absolutely  be  prohibited  from  doing  any  forward  business  what- 
ever. In  fact,  without  the  "futures'*  market,  our  business  would 
be  restricted  to  the  extent  simply  of  executing  orders  fpr  pfQmpt 
shipjneiit:  for  pur  friends, 


I6 

We  regard  the  ^'futures"  business  as  handled  on  the  New 
Orleans  and  New  York  Exchanges,  the  result  of  an  intelligent  ef- 
fort of  many  years'  study,  and  while  of  course  we  realize  some 
abuses  prevalent,  yet  we  cannot  understand  how  a  system  which 
is  so  complete  as  this  system  is  at  present  should  be  torn  to  pieces 
and  the  trade  lapse  back  into  primitive  methods  of  handling  the 
cotton  crop. 

Yours  very  truly, 

W.  J.  Davis  &  Co. 


Members  New  Orleans  Cotton  Exchange 

EUGENE   H.   carter  ERNEST  L.   CARTER 

E.  H.  &  E.  L.  CARTER 
Cable  address  ^'Eugene." 

Mississippi  and  Alabama  Cotton 

Meridian,  Miss.,  March  28^  1911. 
Mr.  Alfred  B.  Shepperson,  Nezv  York,  N.  Y, 

Dear  Sir:  In  the  carrying  on  of  our  business,  we  find  it  abso- 
lutely necessary  to  make  constant  use  of  the  "futures"  markets 
on  the  New  Orleans  and  New  York  Cotton  Exchanges  in  hedg- 
ing our  purchases  and  sales  of  actual  cotton.  Without  this  pro- 
tection against  the  fluctuations  in  the  market,  we  do  not  see  how 
we  could  carry  on  our  business,  except  in  a  very  limited  and 
primitive  way.  In  selling  to  the  cotton  mills  for  shipments  at  a 
stipulated  time  in  the  future,  or  shipment  during  a  series  of 
months,  unless  we  could  buy  ^'futures"  with  which  to  protect  our- 
selves, we  could  not  make  such  sales  to  the  cotton  mills,  and  the 
cotton  mills  could  not  sell  their  product  for  forward  deliveries, 
unless  they  could,  in  turn,  protect  themselves  by  the  purchase  of 
actual  cotton  from  some  cotton  shipper  or  dealer  like  ourselves. 

We  sincerely  trust  that  the  extra  session  of  Congress  will  not 
pass  any  legislation  which  will  upset  or  interfere  with  the  cotton 
exchanges  or  the  present  system  of  doing  business.  We  believe 
it  would  be  disastrous  to  the  South  and  to  the  cotton  trade  in 
general. 

Very  truly  yours, 

E,  H,  &  E.  L.  Carter. 


17 

THREEFOOT  BROTHERS   &   COMPANY 

Cotton  Buyers  and  Exporters 

Cable  address  'Threefoot." 

Meridian,  Miss.,  March  27,  1911. 
Mr.  Alfred  B.  She p person,  Nezv  York,  N,  Y, 

Dear  Sir:  We  beg  to  say  that  the  facilities  for  buying  and 
selling  cotton  for  future  delivery  on  the  New  York  and  New 
Orleans  Exchanges  are  almost  an  absolute  necessity  in  our  busi- 
ness, or,  in  fact,  any  business  connected  with  the  handling  of 
cotton  as  the  cotton  business  of  the  world  is  now  conducted. 
We  find  the  contracts  for  future  delivery  a  protection  to  us  not 
only  against  an  advance  in  price,  if  cotton  has  been  sold  for  for- 
ward shipment,  but  also  a  protection  against  decline  in  price 
when  we  have  bought  cotton  which  we  are  unable  to  dispose  of 
profitably  at  the  moment. 

Yours  very  truly, 
Threefoot  Bros.  &  Company. 


M.  C.   HUMPHREY  W.  R.    HUMPHREY 

HUMPHREY  &  CO. 
Cotton,   Benders   and  Extra    Staples 

Branch  Offices: 
Indianola,  Miss.        Rosedale,  Miss. 
Clarksdale,  Miss.      Itta  Bena,  Miss. 
Greenville,  Miss.       Charleston,  Miss. 
Canton,  Miss.  Yazoo  City,  Miss. 

Memphis,  Tenn. 

Greenwood,  Miss.,  March  9,  1911. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  7. 

Dear  Sir  :  We  consider  the  privilege  of  buying  or  selling  con- 
tracts on  the  Cotton  Exchanges  of  New  York  and  New  Orleans 
as  an  absolute  necessity  when  doing  a  legitimate  spot  cotton  busi- 
ness, using  these  contracts  as  a  hedge  (protection)  against  spot 
contracts  with  the  mills. 

Yours  very  truly, 

Humphrey  &  Co, 


I? 

COPY    OF   TELEGRAM    SENT   BY   MEMPHIS    COTTON 
EXCHANGE  AND  MEMPHIS  MERCHANTS'  EX- 
CHANGE TO  HON.  ROBERT  L.  TAYLOR, 
UNITED  STATES  SENATOR  FROM 
TENNESSEE 

Memphis,  Tenn.,  February  14,  191 1. 

The  commercial  interests  of  Tennessee,  more  especially  the 
cotton  and  grain  Exchanges  of  Memphis,  view  with  much  alarm 
the  bill  pending  in  the  Interstate  Commerce  Committee  looking 
to  the  abolishing  of  "futures"  dealing  in  the  New  York  and  New 
Orleans  Cotton  Exchanges,  and  urgently  request  that  as  a  mem- 
ber of  the  committee  before  which  this  measure  will  come  up  on 
Friday,  you  use  your  best  efforts  to  prevent  its  recommendation 
and  passage.  The  passage  of  such  a  bill  would  work  disaster  to 
the  cotton  and  grain  interests  of  Memphis  and  would  render 
useless  the  new  million  dollar  building  we  have  just  completed 
for  a  home  for  these  two  Exchanges.  The  elimination  of  the 
"futures"  business  in  the  United  States  would  simply  tend  to 
transfer  the  necessary  hedging  transactions  to  Liverpool  and  enable 
the  foreigners  to  fix  the  price  for  the  South's  greatest  product. 
The  passage  of  the  bill  would  cause  a  disastrous  revolution  to 
the  trade  and  leave  the  cotton  growers  in  the  hands  of  the  manu- 
facturers at  home  and  abroad  by  eliminating  buying  competition, 
which  is  only  made  possible  by  the  use  of  the  New  York  and 
New  Orleans  Exchanges  for  hedging  purposes.  A  bill  along 
similar  lines  was  killed  before  the  Judiciary ,  and  Agricultural 
committees  and  in  the  open  Senate  in  Nashville  last  week  by  a 
decisive  vote,  showing  that  there  is  no  demand  by  the  people  of 
this  State  for  such  legislation. 

We  trust  that  as  our  representative  you  will  give  the  business 
interests  of  your  State  the  consideration  due  them  and  vote 
against  this  bill  in  committee  on  Friday. 

We  sign  this  in  behalf  of  the  officers  and  entire  membership 
of  both  the  Cotton  and  Merchants'  Exchanges. 

Jno.  Sneed  Williams, 

President  Memphis   Cotton  Exchange. 

Jas.  B.  Sloan, 

president  Memphis  Merchaijts'  Exchange. 


19 

Branch  Offices :  Clarksdalc,  Miss.   Ardmore,  Okla.  Newport,  Ark. 

WOOTEN  &  HORNOR 

Helena,  Ark.,  April  5,  191 1. 
Mr.  Alfred  B.  Shep person,  New  York,  N.  Y. 

Dear  Sir  :  You  ask,  in  your  letter  of  3d  inst.,  if  the  facilities 
afforded  by  the  New  York  and  New  Orleans  Cotton  Exchanges 
are  of  service  to  us  in  the  legitimate  protection  of  our  trades  in 
actual  cotton;  we  reply  in  the  affirmative,  most  assuredly. 

We  do  not  see  how  our  business  could  be  conducted  with  any 
degree  of  safety  without  such  protection.  Otherwise  every  sale 
of  spot  cotton  for  future  delivery  to  a  mill,  or  every  purchase  of 
spot  cotton  from  a  farmer  or  factor  without  an  order  in  hand  from 
a  mill,  would  be  rank  speculation,  and  we  should  thereby  incur 
a  greater  hazard  than  we  could  afford  to  take. 

Moreover,  the  "futures"  markets  often  afford  an  outlet  for 
cotton  at  more  money  than  spinners  are  willing  to  pay,  and  we 
are  even  now  contemplating  delivering  a  quantity  of  our  cotton 
in  New  York,  as  we  are  unable  to  dispose  of  it  to  spinners  at  all. 

Yours  very  truly, 

WooTEN  &  Hornor. 


Cable  Address:  Henrietta. 

S.  C.  ALEXANDER  COTTON  CO. 

Pine  Bluff,  Ark.,  March  11,  191 1. 
Mr.  Alfred  B.  Shep  person,  Nezv  York,  N.   Y. 

Dear  Sir:  Replying  to  your  letter  of  March  7th  Avith  inquiry 
as  to  whether  or  not  the  opportunity  to  buy  and  sell  cotton  for 
future  delivery  on  the  Exchanges  of  New  York  and  New  Orleans 
is  of  service  in  our  business,  will  say  that  it  is  often  of  great 
service  to  us,  as  otherwise  our  operations  would  often  be  very 
much  curtailed.  It  also  often  allows  us  to  buy  cotton  from  our 
farmer  friends  to  be  delivered  as  the  season  advances  at  prjces 
satisfactory  to  them,  which  otherwise  we  could  not  do. 

Our  experience  in  this  matter,  of  course,  is  the  same  as  most 
other  buyers  in  our  market. 

Yours  truly, 

S.  C.  Alexander  CoipN  C9. 


20 

L.  P.  BARKDULL  &  CO. 
Cotton  Buyers 
Fort  Smith,  Ark.,  March  24,  1911. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  We  practically  do  all  of  our  spot  cotton  business 
based  on  contracts  in  New  York  or  New  Orleans. 

Very  often  the  case  is,  we  have  inquiry  for  cotton  for  ship- 
ment several  months  later ;  then  again  we  may  buy  cotton  that  we 
have  no  order  for,  and  of  course  the  risk  would  be  too  great 
in  either  case  if  we  did  not  use  "futures"  contracts  of  either 
one  of  the  Exchanges.  In  fact,  we  use  "futures"  contracts  to 
keep  from  speculating,  and  it  would  seem  almost  impossible  to 
do  business  unless  we  had  the  privilege  of  protecting  ourselves 
in  either  one  of  these  Exchanges. 

There  are  some  changes  that  should  be  made  in  the  New  York 
Cotton  Exchange  rules,  and  when  this  is  done  we  do  not  see  how 
any  one  could  object  to  the  method  of  doing  business. 

If  the  Scott  Anti-Option  Bill  is  passed  we  would  have  to  handle 
cotton  under  the  old  method,  which  would  be  at  a  greater  risk; 
therefore  we  would  have  to  have  greater  profits,  and  it  would 
have  to  come  out  of  the  pockets  of  the  farmers. 

Yours  very  truly, 

L.  P.  Barkdull  &  Co. 


COPY  OF  TELEGRAM  SENT  BY  THE  AUGUSTA  (GA.) 
COTTON  EXCHANGE,  THROUGH  ITS  COMMITTEE, 
ON  FEBRUARY  14,  191 1,  TO  THE  U.  S.  SENATORS 
AND   MEMBERS   OF  THE  HOUSE  OF  REP- 
RESENTATIVES  FROM  THE   STATE  OF  . 
GEORGIA 
(Printed  by  permission  of  the   Cotton  Exchange) 
At  a  special  meeting  of  Augusta  Cotton  Exchange  and  Board 
of  Trade  held  to-day  a  resolution  was  passed  protesting  against 
the  passage  of  the  Scott  Anti-Option  Bill,  because  without  the 
use  of  protecting  markets  as  a  hedge,  mills,  exporters  and  farmers 
would  be  at  a  great  disadvantage,  which  would  seriously  inter- 
fere  with  the   financing   of  the   South's   greatest   crop.      Please 
use  your  best  influence  to  defeat  this  bill. 

Frank  Barrett  L.  G.  Doughty 

J.  S.  Hall  E.  F.  Verdery 

R,  C,  Neely  Committee. 


21 

Cable  Address:  "Inmanakers." 

INMAN,  AKERS  &  INMAN 

Atlanta,  Ga.,  March  ii,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir  :  We  find  it  very  necessary  to  use  the  New  York  and 
New  Orleans  Cotton  Exchanges  in  our  regular  business  by  buying 
and  selling  future  contracts  in  these  markets  to  protect  ourselves 
when  making  sales  of  cotton  to  mills  and  dealers  for  deferred 
shipment,  and  to  prevent  losses  to  us  by  price  changes.  If  in 
July  or  August,  say,  we  sell  a  mill  one  thousand  bales  of  cotton 
to  be  delivered  them  in  October,  we  buy  ''futures"  contracts  in  Nev/ 
Orleans  or  New  York  as  a  protection  against  an  advance  in  price. 
This,  of  course,  is  customary  with  all  legitimate  cotton  firms,  and 
we  hardly  see  how  the  cotton  business,  or,  for  that  matter,  the 
cotton  spinning  business,  could  be  carried  on  without  these 
facilities,  as  the  risk  involved,  without  such  protection,  would  be 
entirely  too  great  for  conservative  legitimate  concerns  to  un- 
dertake. 

Yours  truly, 

Inman,  Akers  &  Inman. 


LETTER  SENT  BY  MESSRS.  INMAN,  AKERS  &  INMAN, 
OF  ATLANTA,  GA.,  TO  U.   S.   SENATORS  A.  O. 
•     BACON  AND  J.  M.  TERRELL,  OF  GEORGIA 
(Printed  by  permission  of  Messrs.  Inman,  Akers  &  Inman) 

Atlanta,  Ga.,  March  17,  191 1. 
Dear  Sir:  Referring  to  the  Scott  Bill  directed  against  the 
Cotton  Exchanges,  with  which  you  are  doubtless  familiar.  We 
consider  that  the  passage  of  this  bill  would  have  a  very  disastrous 
effect  upon  all  Southern  interests,  upon  the  cotton  merchant, 
upon  the  cotton  mill,  upon  the  cotton  farmer,  and  through  the 
farmer,  upon  all  other  business  interests  of  the   South. 

There  are  doubtless  some  evils  in  the  present  method  of 
marketing  the  cotton  crop  and  of  the  Exchanges  used  in  the 
furtherance  of  that  purpose,  but  the  abolition  of  these  Exchanges 
would  work  far  more  injury  to  the  South  than  those  which  may 
now  exist.  All  products  of  world  consumption  need  markets 
where  buyer  and  seller  can  trade  and  make  and  find  a  ready 


22 

market.  Should  these  open  marts  or  Exchanges  be  abolished,  it 
would  be  much  more  difficult  for  buyer  and  seller  to  find  each 
other,  and  cotton  would  no  longer  be  such  a  liquid  asset  as  at 
present. 

Dealers  in  cotton  goods  must  place  their  orders  with  cotton 
mills  for  delivery  many  months  ahead,  in  order  that  the  required 
goods  may  be  woven,  go  through  the  various  processes  of  manu- 
facture, pass  through  the  hands  of  converters,  jobbers,  whole- 
salers and  retailers,  to  the  consumer.  Cotton  mills  sell  their 
product  for  many  months  in  advance,  and  in  order  to  avoid 
speculation  and  chances  of  loss  by  cotton  advancing  in  value 
before  they  are  ready  to  actually  receive  delivery  of  the  cotton 
and  pay  for  it,  they  buy  cotton  sufficient  to  cover  their  require- 
ments from  cotton  merchants,  to  be  delivered  at  periods  needed. 
The  cotton  merchant,  to  avoid  speculation  and  risk  of  loss  by 
cotton  advancing,  buys  contracts  for  forward  delivery  in  the 
central  marts  or  cotton  Exchanges.  The  mills  therefore  protect 
themselves,  and  the  cotton  merchant  protects  himself  against 
fluctuation  in  value. 

For  instance,  suppose  the  Exposition  Cotton  Mills  in  Atlanta 
sell  a  lot  of  goods  to  be  made  next  October,  and  buy  one  thousand 
bales  of  cotton  from  us  to  be  delivered  them  next  October  to 
protect  themselves  against  their  sale  of  goods.  We,  as  a  matter 
of  protection,  will  buy  on  the  New  York,  New  Orleans  or  Liver- 
pool Cotton  Exchanges  one  thousand  bales  of  cotton  to  be  deliv- 
ered us  in  those  markets  next  October.  We  do  not  really  wish 
the  cotton  delivered  us  in  New  York,  New  Orleans  or  Liverpool, 
and  do  not  expect  to  accept  delivery,  although  we  could  do  so 
if  we  wished.  We  are  really  buying  these  contracts  as  a  pro- 
tection. Next  October,  when  the  cotton  is  moving  freely,  we 
would  buy  the  one  thousand  bales  of  spot  cotton  and  deliver 
same  to  the  Exposition  Cotton  Mills,  at  the  same  time  selling 
our  contracts  for  one  thousand  bales  of  cotton  of  October  deliv- 
ery in  New  York,  New  Orleans  or  Liverpool  to  some  one  who 
could  better  use  the  cotton  in  those  markets  than  we  could.  We 
would  have  attained  our  object,  which  was  protection  in  the  ordi- 
nary course  of  our  business  of  transferring  cotton  from  producer 
to  consumer. 

The  above  is  the  regular,  conservative  method  of  business. 
Should  these  Exchanges  be  abolished,  any  mill  which  sold  its 
goods  to  be  made  up  months  ahead  would  take  heavy  chances  of 
loss,  because  they  could  not  buy  cotton  from  any  one  to  be  deliv- 
ered at  the  required  dates.    The  irv^iiant  would  not  sell  because 


23 

he   could   not   take    such    risk,   and    would    have    no   means    of 
protection. 

There  are  many  farmers  who,  when  the  value  of  cotton  in  the 
spring  and  summer  for  fall  delivery  is  at  such  a  figure  as  to 
give  them  a  fair  profit  above  the  cost  of  production,  sell  part 
of  their  expected  production  to  be  delivered  in  the  fall,  thus 
guaranteeing  themselves  a  profit  on  their  planting  instead  of 
taking  the  risk  of  cotton  dropping  to  low  figures  later  in  the 
fall,  when  there  is  heavy  movement.  With  the  Exchanges  abol- 
ished, however,  they  would  be  unable  to  sell  in  this  way,  because 
the  merchant  would  not  have  a  quick  market  where  he  could 
sell  for  protection  against  any  purchases  he  might  make  from 
farmers,  fertilizer  dealers,  etc. 

With  the  abolition  of  these  central  marts  the  entire  present 
system  and  fabric  of  cotton  merchandise,  cotton  manufacturing 
and  cotton  goods  marketing  would  be  overturned,  and  all  of  this 
business,  being  deprived  of  protective  covers  or  hedges,  would 
be  put  upon  a  very  speculative  and  dangerous  basis. 

The  cotton  business  of  the  world  is  too  big  a  thing,  and  the 
business  prosperity  of  the  South  too  closely  interwoven  with  it, 
for  any  legislation  overturning  the  present  system  to  be  enacted 
without  most  careful  and  unprejudiced  thought,  uninfluenced  by 
the  ignorant  demands  of  many  who  know  absolutely  nothing 
about  the  complications  and  complexities  of  modern  business 
and  the  bad  effects  of  hurried-  or  ill-advised  legislation. 

Yours  very  truly, 

Inman,  Akers  &  Inman. 


J.  N.  King,  Pres.  and  Mgr.  J.  P.  Cooper,  Vice-Pres. 

C.  W.  King,  Sec.  and  Treas. 

THE  HOWEL  COTTON   COMPANY  OF  GEORGIA 

Rome,  Ga.,  March  13,  191 1. 
Mr.  Alfred  B.  S  hep  person,  Nezv  York,  N.   Y. 

Dear  Sir:  We  find  the  "futures"  contract  market  absolutely 
indispensable  to  us  in  the  handling  of  cotton  for  forward  delivery. 
If  we  were  unable  to  use  the  contract  market  to  hedge  our- 
selves, it  would  be  quite  impossible  for  us  to  sell  for  delivery 
in  the  future  actual  spot  cotton  without  indulging  in  rank 
speculation. 

Yours  truly, 

HowEL  Cotton  Co.  of  Georgia. 


Cable  Address  "Ford" 
B.  B.  FORD  &  CO. 

Macon,  Ga.,  March  9,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  Replying  to  your  questions  regarding  the  "futures" 
contract  market,  we  beg  to  say  that  we  find  it  necessary  to  use 
the  "futures"  markets  in  New  Orleans,  New  York  and  Liverpool 
in  order  to  protect  our  sales  and  purchases  of  spot  cotton.  To 
abolish  the  "futures"  system  would,  in  our  opinion,  be  a  serious 
blow  to  all  interested  in  the  cotton  trade,  as  well  as  to  the  pro- 
ducers of  cotton. 

Yours  very  truly, 

B.  B.  Ford  &  Co. 


L.   G.   DOUGHTY  H.   H.  ELLISON 

Cable  Address  "Lyndough" 
L.  G.  DOUGHTY  &  COMPANY 
COTTON  I 

Augusta,  Ga.,  March  10,  1911. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  We  beg  to  advise  that  we  consider  the  New  York 
Cotton  Exchange  to  be  a  worthy  adjunct  to  our  business.  For 
the  past  ten  years  we  have  been,  shipping  50,000  bales  per  year, 
and  sell  such  cotton  to  our  friends  abroad  as  well  as  in  this 
country.  We  sell  the  cotton  for  forward  delivery,  and  we  could 
not  enter  into  transactions  of  this  kind  unless  we  had  the  oppor- 
tunity of  protecting  ourselves  by  the  purchase  of  "futures"  in 
New  York. 

It  is  not  to  our  interest  to  buy  our  "futures"  in  Liverpool,  as 
the  expense  incident  to  such  a  transaction  is  too  heavy,  conse- 
quently we  use  the  New  York  market  almost  entirely.  It  is 
frequently  the  case  that  the  difference  between  spot  cotton  in 
the  South  and  the  prices  of  "futures"  in  New  York  warrants 
us  in  buying  up  a  stock  and  selling  "futures"  against  it,  to  be 
disposed  of  at  a  subsequent  time.  We  avail  of  this  opportunity 
every  year  and  we  find  it  a  very  profitable  business,  and  which 
we  could  not  do  unless  we  had  the  opportunity  of  using  the  New 
York  market. 

We  would  feel  very  sorry  to  see  the  Scott  Bill  become  a  law. 
We  think  that  it  would  be  extremely  detrimental  to  our  interests, 
and  put  us  back  to  where  we  originally  started,  without  ability 


25 

to  do  business  except  for  immediate  and  prompt  shipment.  We 
are  also  afraid  that  our  friends  in  the  South  do  not  appreciate 
the  magnitude  of  this  thing. 

We  are  doing  everything  in  our  small  way  to  bring  influence 
to  bear  on  the  representatives  from  our  section  to  cast  their  votes 
against  this  bill,  which  we  consider  a  menace  to  the  commercial 
interests  of  our  section.  Yours  truly, 

L.  G.  Doughty  &  Company. 


NEW  ORLEANS,  LA.  SAVANNAH,  GA. 

Cables,  "Esteve" 
ESTEVE  BROTHERS  &  CO. 

Savannah,  Ga.,  April  13,  191 1. 
Mr.  Alfred  B.  S  hep  person.  New  York,  N.   Y. 

Dear  Sir:  Replying  to  yours  of  the  nth  inst.  concerning  trans- 
actions in  ''cotton  futures''  on  the  New  York  and  New  Orleans 
Exchanges,  we  write  to  say  that  these  "futures"  markets  are  of 
inestimable  service  to  us,  especially  just  now  when  we  are  selling 
new  crop  cotton,  which  has  not  yet  been  planted. 

Yours  very  truly, 

Esteve  Brothers  &  Co. 


E.  BORNEMANN  &  CO. 

Savannah,  Ga.,   April   14,   191 1. 

Mr.  Alfred  B.  Shep person,  New  York,  N.   Y. 

Dear  Sir:  We  beg  to  state  that  in  all  transactions  we  use 
New  York  and  New  Orleans  Cotton  Exchanges  as  a  hedge,  either 
as  a  protection  against  our  forward  sales  to  mills  when  not  being 
able  at  the  time  to  secure  the  cotton  or  against  purchase  of  cotton 
which  we  have  bought  in  anticipation  of  demand  from  our 
mill   customers. 

We  consider  the  "futures"  Exchanges  a  legitimate  hedge  and 
a  protection  which  every  house  doing  a  legitimate  business  must 
absolutely  have.  As  the  cotton  business  requires  a  big  turn  over, 
it  is  impossible  to  buy  or  sell  all  the  actual  cotton  at  the  same 
time,  and  therefore  a  protection  against  the  big  fluctuations  in 
price  must  exist.  For  this  reason  we  consider  "futures"  Ex- 
changes not  only  a  convenience,  but  an  absolute  necessity  for 
legitimate  trading.  Yours  very  truly, 

E.  Borne  MANN  &  Co. 


26 

KAROW  &  FORRER 

SAVANNAH,    GA. 

Savannah,  Ga.,  April  17,  191 1, 

Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir:  In  reply  to  your  letter  of  the  14th  inst,  we  beg 
to  inform  you  that  the  facilities  for  buying  and  selling  "cotton 
futures"  on  the  New  York  and  New  Orleans  Cotton  Exchanges 
are  indispensable  to  our  business. 

Yours  truly, 

KarOW   &   FORRER. 


F.  FONTANILLS  &  CO. 
COTTON 
Savannah,  Ga.,  April  13,   191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  F. 

Dear  Sir:  Replying  to  your  favor  of  the  nth  inst.,  "futures" 
transactions  on  the  New  Orleans  and  New  York  Cotton  Ex- 
changes are  of  great  value  to  us  as  a  protection  to  our  spot  trans- 
actions. We  feel  that  if  we  did  not  have  the  advantage  of  such 
protection  our  business  would  be  very  seriously  handicapped. 

Yours  very  truly, 

F.   FONTANILLS  &   Co. 


RESOLUTIONS    PASSED   BY   THE   MACON,    GEORGIA, 

COTTON   EXCHANGE,  APRIL  10,  1911 

(Printed   by   permission    of   Macon   Cotton   Exchange) 

At  a  meeting  of  the  Macon  Cotton  Exchange  on  April  10,  191 1, 
the  following   resolution   was   unanimously   adopted : 

Whereas,  There  is  now  pending  before  Congress  certain 
legislation  looking  to  the  abolishment  of  the  present  system  of 
trading  in  "futures"  on  the  New  York  and  New  Orleans  Cotton 
Exchanges;  be  it 

Resolved,  That  the  proposed  legislation  and  the  continued 
agitation  of  the  subject  is,  in  our  opinion,  exceedingly  detrimental 
to  the  interests  of  all  concerned.  It  is  harmful  to  the  spinner 
and  cotton  merchant  in  so  far  as  it  affects  the  value  of  the 
"hedge"  feature  of  his  business.    It  is  still  more  injurious  to  the 


\> 


27 

cotton  grower  in  that  it  necessarily  restricts  the  number  of 
purchasers  of  his  product;  moreover,  it  would  leave  the  regula- 
tion of  prices  largely  in  the  hands  of  those  whose  interest  it  is 
to  depress  them.  We  realize  that  certain  changes  in  the  present 
form  of  contracts  can  and  ought  to  be  made,  which  would  render 
them  more  valuable  to  the  actual  consumer,  and,  at  the  same 
time,  less  liable  to  abuse  by  the  speculative  element.  The  re- 
quired changes,  however,  we  believe  can  be  safely  entrusted  to 
the  integrity  and  intelligence  of  the  several  Exchanges,  whose 
members  are  thoroughly  conversant  with  business  conditions  and 
requirements. 


C.  COCHRANE  &  CO. 

Augusta,  Ga.,  March  30,   191 1. 
Mr.  Alfred  B.  S  hep  person,  Nezv  York,  N.  Y. 

Dear  Sir:  At  times  we  find  both  the  New  York  and  New 
Orleans  ''futures"  markets  of  great  service  in  hedging  (protect- 
ing)  our  business. 

Yours  truly, 

C.  Cochrane  &  Co. 


BENJ.  RHETT  &  CO. 

Mobile,  Ala.,  March  27,  1911. 
Mr.  Alfred  B.  She p person,  New  York,  N.  Y. 

Dear  Sir:  In  reply  to  your  favor  of  the  24th  inst-  and  the 
query  therein  propounded  as  to  the  service  of  the  "futures" 
markets   in   our  business. 

We  have  no  hesitancy  in  saying  that  the  facilities  for  buying 
and  selling  cotton  for  future  delivery  on  the  Cotton  Exchanges 
*of  New  York  and  New  Orleans  are  not  only  of  very  great  ser- 
vice in  our  business  (but  are  practically  a  necessity)  as  a  means 
of  protection  to  us  against  loss  arising  from  advance  in  price 
before  we  can  secure  the  spot  cotton  which  we  may  have  pre- 
viously sold  for  shipment  or  delivery  several  months  ahead. 
Also  from  loss  arising  from  a  decline  in  price  before  we  can 
dispose  of  spot  cotton  which  we  may  have  on  hand,  either  in 
the  shape  of  "overs"  or  of  stock  to  meet  anticipated  demand. 

Yours  very  truly, 

Benj.  Rhett  &  Co. 


2S 

H.  G.  GRIMLEY 
COTTON 

Mobile,  Ala.,  March  ii,  191 1. 
Mr,  Alfred  B.  S  hep  person,  Nezv  York,  N.  Y. 

Dear  Sir:  I  cannot  too  strongly  express  my  opinion  that 
being  able  to  buy  and  sell  cotton  for  future  delivery  on  the 
Cotton  Exchanges  of  New  York  and  New  Orleans  is  of  the 
greatest  use  and  safety  in  conducting  spot  business,  and  it  would 
be  a  national  calamity,  especially  to  the  South,  including  buyer 
and   planter,   if  the   Exchanges   were  to  be  abolished. 

Yours  very  truly, 

H.  G.  Grimley. 


LEHMAN,   WEIL  &   CO. 

COTTON   MERCHANTS 

Montgomery,  Ala.,  March  10,  1911. 
Mr.  Alfred  B.  S  hep  person.  New  York,  N.  Y. 

Dear  Sir:  In  answer  to  your  question  regarding  the  purchase 
and  sale  of  cotton  "futures,"  we  beg  to  advise  that  at  the  present 
writing  we  do  not  understand  what  methods  could  be  substituted 
by  a  conservative  cotton  firm  in  the  South  to  avoid  speculation. 
We  consider  the  New  York  and  New  Orleans  Cotton  Exchanges 
an  absolute  necessity  in  connection  with  a  legitimate  spot  cotton 
business,  as  they  furnish  us  with  the  only  market  where  we  can 
buy  or  sell  against  purchases  or  sales  at  a  moment's  notice  for 
protection.  Yours  truly, 

Lehman,  Weil  &  Co. 


E.  MARTIN  &  CO. 

COTTON    BUYERS 

New  Orleans,  La.,  April  8,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  Owing  to  the  manner  in  which  the  cotton  business 
is  now  done  the  facilities  for  buying  and  selling  cotton  for 
future  delivery  on  the  Cotton  Exchanges  of  New  York  and 
New  Orleans  have  become  of  service  and  a  necessity  in  the  cotton 
buying  business  on  orders  from  spinners  in  this  country  and  for 
export.  Yours  truly, 

E.  Martin  &  Co. 


29 

Morris  Hohenberg  Adolphe  Hohenberg 

Selma,  Ala.  Wetumpka,  Ala, 

Established   in    1879 

M.  HOHENBERG  &  CO. 

COTTON   MERCHANTS 

Selma,  Ala.,  March  10,  191 1. 
Mr.  Alfred  B.  She p person,  New  York,  N,  Y. 

Dear  Sir:  We  consider  the  opportunity  of  buying  and  selling 
^'futures"  on  the  New  York  and  New  Orleans  Cotton  Exchanges 
of  great  benefit  to  our  business  and  to  all  dealers  in  spot  cotton. 
Though  conditions  surrounding  such  operations  are  not  as  yet 
ideal,  they  are  constantly  being  improved  upon  as  experience  and 
exigencies  demand. 

Very  truly  yours, 

M.  Hohenberg  &  Co. 


JOHN  WILKIE  &  CO. 

New   Orleans,  La.,   April  6,   1911. 
Mr.  Alfred  B.  S  hep  person,  New  York,  N.  Y. 

Dear  Sir:  In  reply  to  your  letter,  would  say  that  while  most 
of  our  business  in  the  "futures"  market  is  done  in  Liverpool,  our 
business  being  with  that  market  only,  there  can  be  no  doubt 
that  the  buying  and  selling  for  future  delivery  on  the  Cotton 
I  Exchanges  of  New  York  and  New  Orleans  is  of  the  greatest 
service  in  the  business  generally,  as  a  protection  against  an 
advance  in  price  should  a  firm  have  sold  cotton  to  arrive  or 
against  a  decline  in  price,  should  a  merchant,  farmer  or  spinner 
hold  rather  larger  stocks  of  cotton  than  he  can  sell  or  use  up 
promptly.  It  seems  to  us  that  without  a  "futures"  market  there 
would  be  few  merchants  who  would  care  to  take  the  cotton  off 
the  hands  of  the  producer  as  they  do  to-day,  and  as  a  conse- 
quence the  position  of  the  producer  might  become  rather  an 
uncomfortable  one. 

Yours  very  truly, 

John  Wilkie  &  Co. 


30 

NEW   ORLEANS,  LA.  SAVANNAH,   GA. 

Cable  Address  "Esteve" 
ESTEVE -BROTHERS  &  CO. 

New  Orleans,  La.,  March  lo,  191 1. 
Mr.  Alfred  B.  Shep person,  New  York,  N.  Y, 

Dear  Sir:  In  reply  to  your  favor  of  March  7th,  we  beg  to 
say  that  the  opportunity  to  buy  and  sell  cotton  for  future  delivery 
on  the  Cotton  Exchanges  of  New  York  and  New  Orleans  are 
indeed  of  great  service  in  our  business  as  a  hedge  or  protection 
against   purchases   or   sales    of    spot    cotton. 

Yours  truly, 

Esteve  Bros.   &   Co. 


New  Orleans,   La.  St.   Joseph,   La.  Yazoo   City,   Miss. 

Greenwood,    Miss.  Clarksdale,   Miss.  Greenville,   Miss. 

Vicksburg,  Miss.  Natchez,  Miss.  Gloster,  Miss. 

Cable  Address  "Stewbros" 

STEWART  BROS.  COTTON  CO. 

staples  a  specialty 

New  Orleans,  La.,  March  10,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  A^  Y. 

Dear  Sir:  Your  favor  of  the  7th  instant  at  hand. 
In  answering  the  same  will  say  that  the  use  of  ''futures"  is 
absolutely  necessary  in  carrying  out  the  cotton  buying  and  ex- 
porting business  if  it  is  to  be  done  on  a  legitimate  basis. 
Yours  truly, 

Stewart  Brothers  Cotton  Co. 


SHREVEPORT,  LA.  NEW  ORLEANS,  LA. 

A.  J.   INGERSOLL  &  CO. 
Successors  to  C.  H.  Minge  &  Co. 
COTTON 
Shreveport,  La.,  March  28,  191 1. 

Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y.  ' 

Dear  Sir:  The  use  of  ''futures"  contracts  by  the  spot  cotton 
buyer  in  the  South,  whose  "long"  interest  during  periods  of 
inactivity  will  reach  undue  proportions,  offers  the  only  means  of 
hedging  (protecting)  his  purchases,  thus  keeping  him  in  the 
market  while  his  spot  cotton  accumulations  are  being  marketed. 

It  goes  without  saying  that  the  abolition  of  "futures"  would 


31 

result  in  restricted  business  all  along  the  line,  leaving  the  pro- 
ducer to  carry  his  product  over  dull  periods  or,  by  throwing  it 
on  the  market,   unduly  depress  its  value. 

Without  the  "futures"  hedge  the  strong  and  astute  spot  cotton 
buyer  would  be  encouraged  to  make  forward  sales,  relying  on 
dull  periods,  with  reasonable  certainty  to  cover  his  sales  with 
a  profit. 

The  producer,  in  our  opinion,  is  the  real  beneficiary  of  the 
"futures"  system. 

Yours  truly, 

A.  J.  Ingersoll  &  Co. 


COPY    OF    TELEGRAM    FROM    SHREVEPORT,    LA., 

CHAMBER     OF     COMMERCE,     SENT     TO     THE 

U.    S.    SENATORS    FROM    LOUISIANA 

ON  FEBRUARY   15,   iQH 

Shreveport,  La.,  February  15,  191 1. 
The   Chamber   of   Commerce,   through  its   Cotton   Committee, 
duly  authorized,  hereby  protests  against  favorable  action  on  the 
Scott  Anti-Future  Bill  and  urges  rejection  of  the  measure. 

E.  K.   Smith,  President. 


Boston  Branch  Office,  Mobile  Branch  Office, 

Oliver  Building  57  St.  Francis  Street 

James  Sprunt  William  H.  Sprunt 

British  Vice  Consul 
Imperial  German  Consul 

ALEXANDER  SPRUNT  &  SON 

COTTON    exporters 

Established   1866 

Wilmington,  N.  C,  April  8,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N..Y. 

Dear  Sir:  Replying  to  your  inquiry  of  April  4th,  we  have 
found  the  facilities  for  buying  and  selling  cotton  for  future 
delivery  on  the  Cotton  Exchange  of  New  York  so  important 
to  us  in  hedging  (protecting)  our  transactions  in  spot  cotton 
that  our  junior  partner,  Mr.  W.  H.  Sprunt,  has  become  a  mem- 
ber of  the  New  York  Cotton  Exchange. 

Yours  faithfully, 

Alexander  Sprunt  &  Son. 


32 

SANDERS,  ORR  &  CO. 
COTTON 
Charlotte,  N.  C,  March  23,  191 1. 
Mr.  Alfred  B.  Shepperson,  Neiv  York,  N.  Y. 

Dear  Sir:  In  reply  to  yours  of  the  21st  inst.,  we  beg  to  say 
that  we  consider  that  the  New  York  Cotton  Exchange's  facilities 
for  "cotton  futures"  are  indispensable  to  spot  cotton  dealers 
as  a  protection  to  them  in  making  contracts  with  the  mills  for 
forward    deliveries    of    spot   cotton. 

Yours  truly, 

Sanders,  Orr  &  Co. 


Established  1885 
PARKER  BROS.  &  CO. 

COTTON    MERCHANTS    AND    BROKERS 

Raleigh,  N.  C,  April  15,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  In  regard  to  buying  and  selling  cotton  for  future 
delivery  on  the  Cotton  Exchanges  of  New  York  and  New 
Orleans  and  as  to  whether  this  is  of  service  to  us  in  the  buying 
and  selling  of  spot  cotton,  we  beg  to  say  that  at  times  we  have 
found  these  Exchanges  to  be  good  protection  and  that  we  have 
used  them  to  hedge  (protect)  our  spot  cotton  transactions,  being 
the  only  way  in  which  we  could  hedge  our  cotton. 

Yours  very  truly, 

Parker  Bros.  &  Co. 


Established  New  Bern,  N.  C,  1889 
J.  E.  LATHAM 

COTTON   MERCHANT 

Greensboro,  N.  C,  March  23,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  In  reply  to  your  letter  of  21st  inst.,  we  beg  to 
advise  that  we  frequently  buy  cotton  in  both  New  York  and 
New  Orleans  for  future  delivery  in  order  to  hedge  (protect)  our 
sales  of  spot  cotton  to  mills. 

Yours  truly, 

J.  E.  Latham. 


33 

A.   H.  BOYDEN  E.  R.  OVERMAN  T.  G.  WILLIAMSON 

BOYDEN-OVERMAN  CO. 

COTTON  MERCHANTS 

Salisbury,  N.  C,  March  24,  1911. 
Mr.  Alfred  B.  Shepperson,  Nezv  York,  N.  F. 

My  Dear  Sir:  In  response  to  your  esteemed  favor  of 
March  21st  I  desire  to  say  that  in  my  opinion  if  it  were  not 
for  New  York  and  New  Orleans  Cotton  Exchanges  spot  cotton 
would  be  selling  for  ten  cents  to-day.  For  instance,  I  am  a 
cotton  merchant  handling  ten  or  fifteen  thousand  bales  of  cotton 
per  year,  and  there  are  thousands  of  men  like  myself  scattered 
all  through  the  South  who  arc  buying  spot  cotton.  The  receipts 
of  spot  cotton  in  October,  November  and  December  are  greatly 
in  excess  of  what  we  can  sell,  and  in  consequence  we  are  com- 
pelled to  carry  something  like  two  or  three  thousand  bales  of 
unsold  cotton,  and  but  for  the  New  York  "futures"  market  to 
protect  ourselves,  it  would  be  such  a  hazardous  risk  that  it 
would  drive  out  all  classes  of  men  like  myself,  who  help  to 
keep  up  the  market  in  our  immediate  section  entirely  out  of 
business. 

It  is  a  great  pity,  in  my  opinion,  that  the  farmers  of  the 
South  cannot  understand  and  appreciate  this  fact.  It  is  the 
speculator  that  keeps  up  the  cotton  market,  and  always  will  be 
the  case,  and  I  trust  that  nothing  drastic  will  pass  Congress  to 
interfere  in  this   matter. 

Yours  truly, 

A.    H.    BOYDEN. 


Chas.  F.  Middleton  Geo.  E.  Hazlehurst 

President  Sec'y  and  Treas. 

FARMERS'  AND  SPINNERS'  COTTON  CO. 

COTTON 

Charleston,  S.  C,  April  10,  1911. 

Mr.  Alfred  B.  Shepperson,  Nezv  York,  N.  Y. 

Dear  Sir:  In  reply  to  your  favor  of  the  4th  inst,  I  must  say 
that  handling  "futures"  as  hedges  against  buying  and  selling 
cotton  is  absolutely  necessary  as  a  protection  in  our  business. 

Yours  truly, 
Chas.  F,  Middleton,   President, 


34 

W.  S.  Griffin,  Pres.  and  Mgr.  J.  P.  Cooper,  Vice-Pres. 

L.  A.  CoTHRAN,  Treasurer  C.  W.  Lively,  Secretary 

Offices 

Greenville,  S.  C.   Spartanburg,  S.  C.  Charlotte,  N.  C.   Toccoa,  Ga. 

COOPER  &   GRIFFIN    (Inc.) 
COTTON 
Greenville,  S.  C,  April  8,  191 1. 
Mr.  Alfred  B.Shep person,  Nezv  York,  N.  Y. 

Dear  Sir:  We  have  your  favor  of  the  6th  instant. 
In  reply  beg  to  say  that  the  Cotton  Exchanges  of  New  York 
and  New  Orleans  are  invaluable  to  our  business  as  a  hedge 
(protection),  both  in  buying  and  selling  cotton.  The  basis  busi- 
ness has  controlled  the  trade  for  a  number  of  years  and  will 
doubtless  continue  to  do  so.  As  a  matter  of  fact,  it  is  absolutely 
essential  to  have  a  proper  clearing-house  for  cotton  transactions. 
This  is  as  needful  to  the  cotton  mill  and  farmer  as  to  the  cotton 
merchant,  in  our  opinion.  Furthermore,  it  would  seriously  affect 
the  proper  financing  of  the  South's  great  product  to  have  the 
Exchanges  of  this  country  eliminated. 

Yours  very  truly, 

W.  S.  Griffin, 

Pres.  and  Mgr. 


REID  &  COMPANY 

Cable  Address  "Nodir" 

Norfolk,  Va.,  March  22,  1911. 

Mr.  Alfred  B.  S  hep  per  son,  New  York,  N.   Y. 

Dear  Sir:    We  are  in   receipt  of  your  letter  of   March  21st; 
inquiring    as    to    whether   the   facilities    for   buying   and   selling 
cotton  for  future  delivery  on  the  New  York  Exchange  are  of 
service  in  our  business  for  protection  against  advances  or  declines 
in  the  market. 

In  reply,  we  beg  to  say  that  all  of  our  business  is  based  upon 
our  ability  to  buy  or  sell  contracts  for  future  delivery  simul- 
taneously with  the  sale  of  cotton  to  be  shipped  to  spinners  or 
purchasers  of  cotton  from  the  farmers  or  merchants. 

Without  this  protection  we  would  be  able  to  do  only  a  small 


35 

percentage  of  the  volume  of  business  we  now  do,  and  the  margin 
of  possible  profit  would  have  to  be  enormously  increased  to 
warrant  us  in  taking  the  risk  of  advances  or  declines  in  the 
general  market. 

Yours  truly, 

Reid  &  Company. 


COPY   OF  LETTER   SENT   ON   APRIL  4,    IQH,   TO   THE 

UNITED  STATES  SENATORS  FROM  MISSOURI 

BY  MESSRS.  R.  F.  PHILLIPS  &  CO.,  COTTON 

MERCHANTS  OF  ST.  LOUIS 

(Printed  by  Permission  of  Messrs.  R.  F.  Phillips  &  Co,) 

St.  Louis,  April  4,  191 1. 

Dear  Sir:  We  understand  the  Scott  Anti-Option  Bill  will 
again  be  brought  up  in  your  honorable  body. 

As  handlers  of  spot  cotton,  we  find  business  safeguarded  by 
the  use  of  ''futures"  as  a  protection  against  market  fluctuations. 

Some  suggested  improvements  are  contemplated  in  the  form 
of  contract,  and  we  trust  no  legislative  action  condemning 
"futures"  trading  will  be  taken,  as  such  would  be  a  calamity  to 
the  producer  as  well  as  to  the  user  of  the  "spot"  article. 

Yours  respectfully, 

R.  F.  Phillips  &  Co. 


TELEGRAM  SENT  ON  FEBRUARY  15,  191 1,  BY  THE  NEW 

ENGLAND  COTTON  BUYERS'  ASSOCIATION  TO 

THE  UNITED  STATES  SENATORS  FROM 

MASSACHUSETTS 

(Printed  by  permission  of  the  Executive  Committee  of  the 
Association) 

Boston,  Mass.,  February  15,  191 1. 
We  trust  you  will  use  your  influence  against  the  Scott  Anti- 
Option  Bill.     We  believe  it  extremely  harmful  to  all  dealers  in 
actual   cotton   and    to    all    manufacturing   interests. 

New  England  Cotton  Buyers*  Association. 
Chas.  N.  Brush,  Secretary, 


36 

NATH'l  N.  THAYER  FRANK  H,  BEARING 

BARRY,   THAYER   &   CO. 

30  KiLBY  Street, 
Boston,  Mass.,  March  8,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir  :  We  are  in  receipt  of  your  valued  favor  of  7th  inst., 
and  carefully  note  contents.  The  New  York  Cotton  Exchange  is 
of  advantage  to  us  in  our  business  as  a  matter  of  protection,  in 
the  event  of  our  making  any  sales  for  forward  delivery.  If  we 
were  prohibited  from  using  the  Exchanges,  of  course  it  would 
compel  us  to  use  the  Liverpool  market;  or  we  should  be  unable 
to  make  sales  for  forward  delivery  unless  we  were  willing  to 
take  the  risk  that  we  might  be  able  to  buy  the  cotton  when  due 
at  the  price  at  which  it  was  sold;  or  unless  we  could  buy  it  of 
some  responsible  party  in  the  South.  In  our  opinion,  it  would 
seriously  affect  the  cotton  business  (at  least  temporarily)  if 
cotton  merchants  were  prohibited  from  making  legitimate  trans- 
actions on  the  Exchanges  of  this  country. 

Yours  truly, 

Barry,  Thayer  &  Co. 


W.  F.  HOOPER  C.  C.  BUFFINTON 

HOOPER  &  BUFFINTON 

COTTON    BUYERS 

Fall  River,  Mass.,  April  3,  191 1. 
Mr.  Alfred  B.  Shepperson,  Nezv  York,  N.  Y. 

Dear  Sir:  The  opportunity  to  hedge  sales  or  purchases  by 
buying  or  selling  contracts  in  the  cotton  "futures"  market  is  of 
the  greatest  possible  importance  to  all  parties  dealing  in  actual 
cotton,  and  also  to  the  mills.  The  latter  may  want  to  make  a 
sale  of  goods  to  be  made  and  delivered  at  some  subsequent  time 
and  to  cover  such  sale  of  goods  by  the  purchase  of  cotton.  It 
may  not  be  possible  at  the  moment  for  a  cotton  dealer  to  buy 
just  the  style  of  cotton  that  the  mill  wants,  but  he  would  sell 
the  mill  the  cotton  it  wanted  and  buy  cotton  "futures"  to  hold 
until  he  could  find  and  buy  the  cotton  desired,  when  such  cotton 
would  be  bought  in  the  South  and  the  cotton  "futures"  sold 
out,  they  in  the  meantime  acting  as  a  protection  to  the  dealer 
against  fluctuations  in  the  market.  The  same  thing  would  apply 
if  the  mill  sold  the  goods  ahead  and  bought  the  cotton  "futures" 


itself,  until  such  time  as  it  could  go  into  the  market  and  buy 
such    actual    cotton    as    it   required. 

Again,  it  is  the  custom  of  cotton  dealers  to  constantly  buy 
cotton  in  the  South  to  bring  forward  before  selling  it,  and  to 
hedge  such  purchases  by  selling  "cotton  futures.'*  As  fast  as 
they  sell  the  cotton,  either  while  in  transit  or  perhaps  after  it  has 
arrived  and  been  put  in  store,  they  buy  back  the  '^cotton  futures," 
the  sale  of  "futures"  having  acted  as  a  protection  against  any 
change  in  the  market.  Large  dealers  have  their  agents  in  the 
Southern  interior  markets  buying  cotton  practically  every  day  at 
a  price  based  upon  the  price  of  "cotton  futures,"  and  what  cotton 
is  not  sold  each  day  to  mills  is  sold  against  in  the  "cotton 
futures"  market  as  a  protection  against  the  fluctuations  of  the 
market.  It  often  happens  that  cotton  dealers  are  buying  cotton 
and  hedging  it,  and  because  they  can  hedge  it,  when  mills  are 
buying  little  or  nothing.  In  the  times  of  very  heavy  receipts,  if 
the  buying  of  actual  cotton  was  limited  to  only  what  the  mills 
were  disposed  to  buy,  it  would  seem  that  the  price  might  suffer 
materially. 

We  cannot  but  think  that  the  Exchanges  have  helped  the  South 
in  the  price  of  its  cotton,  and  that  the  mills  should  be  the  ones 
to  desire  the  abolition  of  the  Exchanges.  Perhaps  they  do,  but 
we  cannot  imagine  anything  but  chaos  in  the  cotton  business 
generally  without  the  protection  afforded  by  the  Cotton 
Exchanges. 

Yours  truly, 

Hooper  &  Buffinton. 


WILLIAM  ALMY  &  CO. 

cotton  buyers  and  brokers 

4  Liberty  Square, 
Boston,  Mass.,  March  22,  191 1. 

Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  We  use  "futures"  in  our  business  and  we  find  them 
a  service  and  a  protection.  We  use  them  as  a  protection  for 
future  sales  of  actual  cotton  to  spinners.  We  *  also  use  them 
for  sales  against  actual  purchases  of  cotton. 

Yours  very  truly, 

William  Almy  &  Co. 


38. 
S.  D.  BUSH  &  CO. 

COTTON 

71  KiLBY  Street, 
Boston,  Mass.,  March  9,   191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir:  The  opportunity  to  buy  and  sell  cotton  for  future 
delivery  is  essential  to  the  conservative  handling  of  our  business. 
Without  it  a  large  part  of  our  business  would  be  ,  speculation 
pure  and  simple. 

If  the  New  York  and  New  Orleans  Cotton  Exchanges  were 
closed,  we  should  be  obliged  to  employ  foreign  Exchanges  for 
our  hedging  operations,  causing  increased  expense,  inconveni- 
ence  and   delay. 

Very  truly  yours, 

S.  D.  Bush  &  Co. 


CHAS.    STORROW,    SPECIAL 
WALTER    E.    ANDREWS  EDWARD    C.    STORROW 

CHARLES  STORROW  &  CO. 

53   State   Street, 
Boston,  Mass.,  March  27,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir  :  We  consider  New  York  and  New  Orleans  "futures" 
markets  a  very  great  help  in  hedging  (protecting)  sales  of  cotton 
for  future  delivery  to  mills  here  in  New  England.  For  instance, 
many  of  our  customers  during  the  spring  and  summer  sell  their 
goods  for  delivery  during  the  following  autumn  and  winter. 
When  they  make  these  sales  of  goods  they  wish  to  buy  cotton 
which  they  expect  to  use  in  making  these  goods.  As  there  is 
often  but  a  comparatively  small  supply  of  actual  cotton  at  that 
time,  they  generally  buy  new  crop  cotton  to  be  shipped  during 
the  early  fall.  If  the  seller  of  this  cotton  had  no  means  of 
protecting  himself  in  the  "futures"  markets  he  would  take  a 
very  great  risl^  in  making  these  sales,  a  risk  which  very  few 
dealers   indeed  would   feel    willing  or   able  to  assume. 

Yours  truly, 

Charles  Storrow  &  Co. 


39 

INGERSOLL   AMORY  ELTON    CLARK  C.    C.    PAYSON 

INGERSOLL  AMORY  &  CO. 

10  Post-Office  Square, 
Boston,  Mass.,  March  22,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  Replying  to  your  letter  of  the  21st,  we  often  do 
considerable  business  during  the  spring  and  summer  for  October, 
November,  December  and  January  shipments,  and  if  we  did  not 
have  the  privilege  of  hedging  in  the  New  York  or  New  Orleans 
Cotton  Exchanges  with  ''futures"  contracts  we  do  not  see  how 
this  business  could  be  done  or  how  the  mills  could  protect  them- 
selves on  cotton. 

Yours  very  truly, 

Ingersoll  Amory  &  Co. 


Fall  River,  Mass.  Providence,  R.  I.  Montreal,  P.  Q. 

CHAS.   N.   brush  PHILIP  GARDNER 

GEO.  ATKINSON,  JR.  R.  J.   CROOKS 

J.    P.    COOPER,    SPECIAL    PARTNER 

COOPER  &  BRUSH 
COTTON 

830  Exchange  Building, 
Boston,  Mass.,  March  8,  191 1. 
Mr.  Alfred  B.  She p person,  Nezv  York,  N.  Y. 

Dear  Sir:  We  beg  to  state  that  the  opportunity  to  buy  and 
sell  cotton  for  future  delivery  on  the  New  York  Cotton  Exchange 
is  of  the  greatest  value  to  us  as  protection  against  forward  sales 
to  mills  and  also  as  protection  on  cotton  we  may  be  carrying 
for  ourselves  and  others. 

Our  use  of  the  Cotton  Exchange  is  strictly  confined  to  hedging 
operations,  and  the  removal  of  such  protection  would  inevitably 
limit  our  usefulness  to  the  mills  to  which  we  have  supplied  cotton 
for  years. 

We  are  so  much  nearer  New  York  that  we  seldom  use  the 
New  Orleans  Exchange,  but,  in  our  opinion,  it  is  of  great  benefit 
to  the  trade  for  the  same  purposes. 

Yours  very  truly, 

Cooper  &  Brush. 


40 

LUCIUS  BEEBE  &  COMPANY 

dealers  in  cotton 

89  State  Street, 
Boston,  Mass.,  March  18,  191 1. 

Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir  :  Referring  to  your  letter  of  March  7th,  will  say  that 
the  opportunity  to  buy  and  sell  cotton  for  future  delivery  on  the 
Cotton  Exchanges  of  New  York  and  New  Orleans  is  of  the 
greatest  service  to  us  in  our  business  as  a  prevention  against 
an  advance  in  prices  before  we  secure  the  spot  cotton,  which  we 
sell  for  delivery  several  months  ahead  to  the  various  spinners. 

Respectfully  yours, 

L.  Beebe  &  Co. 


TELEGRAM    SENT    ON    FEBRUARY    15,    1911,    BY    THE 
MOBILE,  ALA.,  COTTON  EXCHANGE  TO  THE  CHAIR- 
MAN   OF    THE    U.    S.    SENATE    COMMITTEE    ON 
INTERSTATE  AND  FOREIGN  COMMERCE, 
WASHINGTON,  D.  C. 

This  Exchange  protests  against  the  passage  of  the  Scott  Anti- 
Option  Bill  on  the  ground  that  it  will  turn  the  cotton  market 
entirely  over  to  European  Exchanges,  which,  to  say  the  least,  are 
unfriendly  to  the  South's  most  valuable  commodity.  It  will  elim- 
inate many  of  the  smaller  buyers,  as  they  will  be  unable  to 
finance  their  purchases,  having  no  market  in  which  to  hedge.  It 
will  take  from  America  the  means  of  protection  of  the  price  of 
its  most  valuable  export  commodity,  and  will  undoubtedly  makei 
a  material  difference  against  her  in  the  balance  of  trade. 

This  Exchange  does  exclusively  a  spot  cotton  business  and  has 
no  ''futures"  branch,  but  realizes  the  necessity  of  having  some 
means  of  protecting  the  cotton   interests  in  this  country. 

We  protest  against  the  hasty  passage  of  this  bill  and  ask  for 
a  hearing. 

T.  K.  Irwin, 

President  Mobile  Cotton  Exchange. 


41 

Branch  Office,  New  Bedford,  Mass. 

R.  M.  Whitman,  Manager 

Jeffrey  Hazard,  President  F.  O.  Allen,  Sec. 

L.  H.  Hazard,  Treas.  A.  W.  Newell,  Asst.  Sec. 

Cable  Address  "Jeffrey" 

HAZARD  COTTON  COMPANY 

Providence,  R.  I.,  March  9,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  We  find  the  New  York  Cotton  Exchange  of  great 
service  in  enabHng  us  to  secure  protection  against  sales  for 
delivery  of  cotton  to  be  made  several  months  in  the  future. 
Manufacturers  would  find  it  much  more  difficult  to  cover  with 
cotton  their  contracts  for  the  later  delivery  of  goods  were  there 
not  a  Cotton  Exchange  upon  which  immediate  and  dependable 
prices  could  be  made  for  the  raw  material. 
Yours  truly, 

Hazard  Cotton   Company, 

Jeffrey  Hazard,  Preset. 


VAN  LEER  &  COMPANY 

COTTON 

241  Chestnut  Street, 

Philadelphia,  Pa.,  March  8,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  Replying  to  yours  of  7th  inst.,  we  beg  to  state  that 
it  will  be  impossible  to  do  business  for  the  future  delivery  of 
spot  cotton  without  having  the  New  York  or  New  Orleans 
Exchanges  to  work  through.  If  we  had  no  Exchanges  in  this 
country  it  would  be  impossible  to  do  business  on  as  close  a 
margin,  or  any  such  basis  as  we  have  been  doing  it  for  years, 
and  we  think  most  of  the  hardship  would  eventually  fall  upon 
the  farmer,  for  he  would  have  to  carry  the  cotton  until  such  times 
as  the  mills  were  ready  to  buy,  and  it  would  make  business, 
which  is  perfectly  safe  now,  very  hazardous.  We  sincerely  trust 
there  will  be  nothing  done  to  put  the  Exchanges  out  of  business, 
for  it  would  be  a  great  blow  to  this  country  as  far  as  the  cotton 
industry  is  concerned. 

Yours  very  truly. 

Van  Leer  &  Company. 


42 

Cable  Address  Anderclay 

ANDERSON,  CLAYTON  &  CO. 
COTTON 

Oklahoma  City,  Okla.,  March  lo,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  Yorkj  N.  Y. 

Dear  Sir:  In  reply  to  your  letter  of  the  7th  inst,  we  will  say 
that  the  New  York  and  New  Orleans  markets  are  an  absolute 
necessity  to  the  conduct  of  a  merchant's  business  in  cotton,  such 
as  we  are  engaged  in.  We  have  customers  in  New  England, 
also  in  Europe,  who  apply  to  us  at  various  times  throughout  the 
spring  and  summer,  say  after  March  ist,  for  offers  of  cotton 
to  be  delivered  in  October,  November,  December  and  January 
of  the  following  season.  These  customers  are  desirous  of  buying 
at  such  times  on  account  of  the  fact  that  they  have  made,  or  are 
in  position  to  make,  sales  of  their  product  for  future  delivery 
and  wish  to  avoid  speculation  by  immediately  covering  them- 
selves with  an  actual  purchase  of  an  equivalent  amount  of  raw 
cotton.  We,  on  our  part,  are  enabled  to  contract  with  them 
for  the  delivery  of  the  desired  quantity  of  cotton  at  the  time 
that  they  will  need  it  by  reason  of  the  fact  that  we  can  buy 
"futures"  contracts  on  the  New  York  or  New  Orleans  Cotton 
Exchanges  for  an  equal  number  of  bales,  to  protect  us  against 
any  advance  in  the  market  between  the  time  we  make  such 
contract  with  our  customer  and  the  time  we  are  enabled  to 
buy  the  cotton  from  the  producer.  Without  the  facility  of  thus 
protecting  ourselves  we  would  be  compelled  to  decline  to  enter 
into  such  contracts,  as  they  would  be  highly  speculative  and  not 
the  character  of  business  that  conservative  merchants  would  care 
to  engage  in. 

Conversely,  we  are  enabled  by  the  use  of  the  Exchanges  during 
the  height  of  the  marketing  season,  say  October,  November  and 
December,  to  buy  freely  from  the  producer,  even  though  there 
is  at  the  time  no  active  demand  for  the  actual  spot  cotton  from 
our  customers — the  mills.  This  has  been  particularly  the  case 
in  the  last  two  seasons,  when  the  market  in  New  York  and 
New  Orleans  has  been  forced  up  even  during  the  active  marketing 
season  to  a  point  which  greatly  curtailed  the  demand  on  the 
part  of  the  mills,  but  this  condition  affected  very  little  the  facility 
of  the  producer  to  dispose  of  his  cotton  or  of  the  merchant  to 
buy  it  from  him,  on  account  of  the  fact  that  merchants  of  experi- 


43 

ence  figured  rightly  that  it  would  only  be  a  matter  of  time  when 
conditions  would  right  themselves  and  the  mills  would  again  be 
active  buyers  of  spot  cotton,  as  in  the  final  analysis  every  bale 
must  find  its  way  to  a  spindle.  The  cotton  merchants  of  the 
South,  therefore,  continued  at  such  times  to  buy  freely  and  to 
protect  themselves  against  the  possibility  of  a  decline  by  selling 
''futures"  contracts  for  an  equivalent  number  of  bales  on  the 
New  York  and  New  Orleans  Cotton  Exchanges.  Their  judgment 
proved  correct  in  both  seasons.  After  the  great  bulk  of  the  crop 
had  been  marketed  in  both  years,  speculators  found  that  instead 
of  merely  buying  paper  contracts,  they  had  bought  many  thou- 
sands of  bales  of  the  actual  cotton  from  merchants  who  owned 
the  cotton  and  were  in  position  to  deliver  it  to  them.  Upon 
the  realization  of  this  fact  by  the  speculators  a  decline  took  place 
in  the  markets  of  the  world  in  both  seasons,  which  put  the 
market  to  a  point  where  the  mills  could  see  their  way  clear  to 
buy  cotton,  and  as  fast  as  the  cotton  merchants  sold  the  cotton 
to  the  mills  they  bought  in  their  hedging  contracts  for  ''futures" 
in  New  York  and  New  Orleans,  thus  closing  the  transactions. 

Without  the  New  York  and  New  Orleans  Cotton  Exchanges 
the  business  of  the  hundreds  of  cotton  merchants  throughout 
the  South,  whose  ramifications  reach  into  every  small  town 
throughout  the  cotton  belt  and  afford  a  market  every  day  to 
the  producer,  would  either  entirely  cease  or  else  be  so  greatly 
curtailed  that  the  great  bulk  of  the  cotton  business  would  prob- 
ably have  to  be  handled  by  the  methods  existing  forty  years  ago. 
These  methods,  as  you  know,  necessitated  the  shipment  of  the 
cotton  to  large  markets  for  storage  and  sale,  at  great  expense 
for  commissions,  interest,  insurance,  storage  and  other  attendant 
charges,  amounting,  we  should  say,  to  an  average  of  at  least  $5.00 
per  bale,  whereas  under  the  present  system  of  marketing  we  be- 
lieve that  no  one  familiar  with  the  facts  would  contend  that  the 
average  expense  of  marketing  from  the  producer  to  the  spinner, 
so  far  as  the  expense  and  profits  of  the  middle  man  are  con- 
cerned, would  exceed   an  average  of   $1.00  per  bale. 

The  great  markets  of  New  York  and  New  Orleans  are  common 
meeting  places  for  producers,  merchants,  brokers  and  consumers 
all  over  the  world.  I  include  the  producer,  as  of  all  the  inter- 
ested parties  I  believe  he  uses  the  Exchanges  to  as  great  an 
extent  as  any  of  the  factors  named.  We  have  shown  how  the 
producers  during  the  past  two  seasons  were  enabled  to  dispose 
of  their  cotton  at  a  time  when  the  markets  were  forced  so  high 


44 

that  the  demand  from  the  mills  had  almost  ceased,  and  it  is  our 
judgment  that  in  the  last  two  years  the  producers  have  been 
enabled  to  market  at  top  prices  several  millions  of  bales  on  the 
New  York  and  New  Orleans  Cotton  Exchanges,  the  buyers  being 
scattered  all  over  the  world. 

In  this  letter  we  have  spoken  more  particularly  of  the  specu- 
lator as  taking  one  side  of  the  contract  on  the  Exchanges,  but  it 
happens  just  as  often  that  both  sides  of  the  contract  are  made  by 
legitimate  merchants,  who  wish  to  protect  themselves  from  fluc- 
tuations in  the  market  until  their  trades  can  be  definitely  closed 
for  the  actual  cotton. 

For  instance,  if  we  should  buy  to-day  i,ooo  bales  of  cotton  at 
an  interior  town  in  Oklahoma  at  14  cents  per  pound  for  basis  of 
middling,  it  would  be  impossible  for  us  to  know  the  exact  num- 
ber of  bales  of  each  grade  in  the  1,000  bales  until  we  sent  our 
agent  to  class  and  receive  the  cotton.  In  the  busy  part  of  the 
season  this  would  probably  take  a  week's  time,  and  in  the  mean- 
time the  market  may  have  declined  a  cent  a  pound,  so  in  order 
to  protect  ourselves  we  sell  1,000  bales  of  ^'futures"  contracts  on 
the  New  York  or  New  Orleans  Cotton  Exchanges  to  protect 
us  until  such  time  as  we  know  exactly  what  grades  we  are  in 
position  to  offer  to  the  mills.  On  the  other  hand,  a  mill  in 
Russia,  say,  might  sell  their  yarns  for  the  equivalent  of  1,000 
bales  of  cotton,  and  not  having  at  the  moment  satisfactory  offers 
from  cotton  merchants  for  the  desired  quantity,  quality  and 
delivery,  they  will  purchase  1,000  bales  of  "futures"  contracts 
in  New  York  or  New  Orleans  to  protect  themselves,  pending  a 
time  when  they  can  make  a  satisfactory  purchase  of  the  actual 
spot  cotton.  It  is  quite  conceivable,  therefore,  that  the  1,000  bales 
of  "futures"  sold  by  us  will  be  bought  by  a  mill  in  Russia,  both 
buyer  and  seller  having  entered  into  a  perfectly  legitimate  con- 
tract and  one  which  protects  them  against  sharp  fluctuations  in 
the  market.  This  character  of  business  is  done  on  the  New 
York  and  New  Orleans  Cotton  Exchanges  every  day,  the  pro- 
ducer of  the  cotton  in  America  being  enabled  by  the  use  of  the 
telegraph  and  cable  to  meet  on  the  Exchange  the  consumer  of  his 
product  in  all  parts  of  the  world,  and  dispose  of  the  same  to  the 
best  possible  advantage,  with  the  minimum  of  risk  and  at  a 
minimum  of  expense. 

Eliminate  these  world-serving  market  places,  which  are  the 
economic  results  of  years  of  experience  and  study  and  "a  sur- 
vival of  the  fittest,"  and  we  go  back,  as  stated  before,  to  con- 


45 

ditions  of  forty  or  fifty  years  ago,  resulting  in  almost  incalculable 
economic  loss  to  the  world  at  large  and  particularly  to  the  cotton 
producers  of  the  South. 

We  have  dwelt  very  much  at  length  on  this  subject,  but  it 
is  one  that  we  are  greatly  interested  in,  and  we  feel  that  it  is  the 
duty  of  every  one  with  a  knowledge  of  the  matter  to  do  what 
they  can  to  prevent  the  enactment  of  ill-considered  legislation 
looking  to  the  destruction  of  the  Cotton  Exchanges  of  New 
York  and  New  Orleans.     Yours  very  truly, 

Anderson,  Clayton  &  Co. 


L.  H.  LOVE  T.  A.   THURMOND 

Cable  Address  "Lovemond" 
LOVE  &  THURMOND 
COTTON 
Ardmore,  Okla.,  March  25,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N,  Y. 

Dear  Sir:  Replying  to  your  favor  of  the  21st  inst.,  it  would 
be  impossible  to  sell  cotton  on  orders  for  delivery  several  months 
in  the  future  on  a  conservative  basis  without  having  the  privilege 
of  buying  "futures"  on  the  Cotton  Exchanges  of  New  York  and 
New  Orleans,  as  a  protection  against  an  advance  in  price. 

Yours  very  truly. 

Love  &  Thurmond. 


ADA,  OKLAHOMA  COLUMBUS,  MISS. 

FRIERSON  BROTHERS 

COTTON    MERCHANTS 

Ada,  Oklahoma,  March  28,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  We  have  your  letter  of  March  21st  inquiring  whether 
"the  facilities  for  buying  and  selling  cotton  for  future  delivery 
on  the  Cotton  Exchanges  of  New  York  and  New  Orleans  are  of 
service  in  our  business  as  a  protection,  etc.,*'  and  in  reply  beg  to 
inform  you  that  these  Exchanges  afford  us  the  only  protection  we 
can  get,  and  we  should  find  it  very  inconvenient  to  carry  on  a 
spot  cotton  business  without  these  facilities  for  hedging  (pro- 
tecting) our  daily  purchases  and  sales.     Yours  very  truly, 

Frierson  Bros. 


46 

COPY  OF  TELEGRAM  SENT  BY  GALVESTON  COTTON 

EXCHANGE    ON    FEB.    i6,    191 1,    TO    HON.    JOSEPH 

W.   BAILEY,   U.   S.   SENATOR   FROM   TEXAS 

Galveston,  Texas,  February  16,  1911. 
Hon.  J.  W.  Bailey,  U.  S.  Senator, 

Washington,  D.  C. 
The  passage  of  the  so-called  Scott  Anti-Futures  Bill  will  ulti- 
mately place  the  control  of  cotton   in  the  hands   of   enormous 
aggregations   of  capital   as   thoroughly  as  oil,   beef  and   similar 
products  are  now  controlled  by  trusts.     In  the  alternative   we 
would  be  absolutely  dependent  upon  Liverpool  and  Bremen  Ex 
changes  to  the  detriment  of  the  cotton  grower.     We  urge  you 
to  use  your  influence  and  vote  against  the  passage  of  this  bill. 
Galveston  Cotton  Exchange, 

I.  H.  Kempner,  Prest. 


COPY    OF    TELEGRAMS    SENT    BY    MERCHANTS    OF 

GALVESTON,     TEXAS,    ON    FEB.     16,     191 1,    TO 

HON.    J.    W.    BAILEY    AND    HON.    C.    A. 

CULBERSON,     U.     S.     SENATORS 

FROM  TEXAS 

Galveston,  Texas,  February  16,  191 1. 
Please  do  all  in  your  power  to  prevent  the  Scott  Anti-Option 
Bill,  which  will  come  up  for  consideration  in  the  House  next 
Friday,  from  passing.  This  is  an  extremely  dangerous  measure, 
which  will  unsettle  the  entire  legitimate  cotton  business  of  the 
country  if  it  should  become  law,  as  neither  traders  could  buy 
cotton  nor  banks  lend  money  on  it  with  safety.  It  is  too  impor- 
tant a  matter  and  affects  too  many  interests  to  be  railroaded 
through  Congress  without  the  fullest  testimony  from  those  inter- 
ested. It  would  seriously  affect  the  cotton  grower  and  the  cotton 
merchants  throughout  the  cotton  country,  and  we  ask  your  val- 
uable support  to  present  the  case  in  whichever  of  the  Houses  of 
Congress  it  may  be  brought   up. 

P.  G.  Pauls  Saml.  Kerr  Jno.  Wells 

J.  W.  Steele  Oswald  Flint  D.  S.  Godwin 

Eustace  Taylor        D.  W.  Kempner  W.  Nisbet 

M.  Lasker  F.  B.  Von  Harten        E.  C  Worrall 

U.  MULLER 

(Above  telegrams  printed  by  permission  of  Mr.  I.  H.  Kempner, 
Pres't  of  Galveston  Cotton  Exchange) 


47 

LETTER  FROM  MR.  W.  L.  CLAYTON,  PRESIDENT  OF 

THE  OKLAHOMA  STATE  COTTON  EXCHANGE, 

TO  HON.  THOS.  P.  GORE,  U.  S.  SENATOR 

FROM  OKLAHOMA 

(Printed   by    Mr.    Clayton's    Permission) 

W.  L.  Clayton,  Pres.,  J.  R.  McKnight,  Vice-Pres., 

Oklahoma  City,  Okla.  Oklahoma  City,  Okla. 

C.  W.  Hancock,  Sec,  and  Treas.,  Ardmore,  Okla. 

THE  OKLAHOMA    STATE   COTTON    EXCHANGE 
(Chartered) 

Board  of  Directors 
W.  L.  Clayton,  Oklahoma  City,  Okla. 
S.  W.  King,  Dallas,  Texas 
R.  T.  Harriss,  Oklahoma  City,  Okla. 
J.  R.  McKnight,  Oklahoma  City,  Okla. 
J.  A.  Sewall,  Jr.,  Oklahoma  City,  Okla. 
J.  M.  Caine,  Oklahoma  City,  Okla. 
L.  H.   Love,   Ardmore,   Okla. 

Office  of  the  President, 
Oklahoma  City,  Okla.,  March  17,    191 1. 
Dear  Sir:  It  is  my  understanding  that  an  effort  will  be  made 
at  the  coming  session  of  Congress  (which  convenes  April  4th)  to 
pass  the  Scott  Anti-Option  Bill.     I  think  I   am  safe  in  saying 
that  the  members  of  this  Exchange  are  unanimous  in  the  belief 
that  the  passage  of  this  bill,   or  any  other  measure  of  similar 
import,  would  be  extremely  detrimental  to  the  interests  of  pro- 
ducers and  handlers  of  cotton  in   this  State,  and  knowing  that 
your  aim  is  to  protect  the  interests  of  the  people  of  Oklahoma, 
I  take  the  liberty  of  presenting  to  you  as  briefly   as  possible  a 
■  few  reasons  why  the  present  method  of  marketing  our  cotton 
crop    (which  method  the   Scott   Bill  attempts  to   overthrow)    is 
the  most  satisfactory  and  economical  one  that  has  been  devised 
out  of  years  of  experience  and  study. 

In  many  lines  of  business  the  tendency  in  recent  years  has  been 
toward  an  increase  in  the  size  of  the  business  unit,  and  ipso  facto 
a  decrease  in  the  number  of  such  units.  The  result  has  been 
the  concentration  of  business  in  those  lines  in  the  hands  of  a  few 
strong  firms  or  corporations  who  could,  by  co-operation,  largely 


48 

control  prices.  This  has  not  been  the  ca^e  in  the  cotton  business ; 
the  size  of  the  unit  has  not  increased;  the  number  of  the  units 
has  materially  increased.  The  result  is  that  the  cotton  business 
is  conducted  on  a  highly  competitive  basis  all  along  the  line,  from 
the  producer  of  the  cotton  to  the  eventual  consumer  of  the  goods. 

Inasmuch  as  cotton  runs  into  large  values,  it  would  seem  that 
one  important  element  tending  toward  monopoly  or  semi- 
monopoly  is  inherent  in  the  business,  in  that  huge  sums  of  capital 
are  required  to  merchandise  and  manufacture  it.  It  is  apparent, 
therefore,  that  there  must  exist  some  strong  counteracting  influ- 
ences which  have  served  to  keep  this  great  industry  in  the 
competitive  class. 

I  am  stongly  of  the  opinion  that  one  of  the  most  potent  of 
these  influences  is  the  existence  of  the  great  Cotton  Exchanges, 
where  producers,  merchants  and  consumers  from  all  over  the 
world  can  meet  daily,  through  the  use  of  the  telegraph  and 
cable,  and  compete  with  each  other  in  the  handling  of  this  great 
commodity. 

A  cotton  merchant  in  Oklahoma  City,  for  instance,  has  mill 
customers  in  this  country,  Europe  and  Japan,  who  apply  to  him 
at  various  times  throughout  the  spring  and  summer,  say  on  and 
after  March  ist,  for  offers  on  cotton  to  be  delivered  in  October, 
November,  December  and  January  of  the  following  season. 
These  customers  are  desirous  of  buying  at  such  times  on  account 
of  the  fact  that  they  have  made,  or  are  in  position  to  make,  sales 
of  their  product  for  future  delivery  and  wish  to  avoid  speculation 
by  immediately  covering  themselves  with  an  actual  purchase  of 
an  equivalent  amount  of  raw  cotton.  The  merchant,  on  his  part, 
is  enabled  to  contract  with  them  for  the  delivery  of  the  desired 
quantity  of  cotton  at  the  time  that  they  will  need  it  by  reason 
of  the  fact  that  he  can  buy  ''futures"  contracts  on  the  New 
York  or  New  Orleans  Cotton  Exchanges  for  an  equal  number 
of  bales,  to  protect  him  against  any  advance  in  the  market  be- 
tween the  time  he  makes  such  contract  with  his  customer  and  the  ' 
time  he  buys  the  actual  cotton  from  the  producer.  Without  the 
facility  of  thus  protecting  himself,  the  conservative  merchant 
would  decline  to  enter  into  such  contracts,  as  they  would  be  highly 
speculative  and  not  the  character  of  business  that  he  could  afford 
to  engage  in. 

Conversely,  the  merchant  is  enabled  by  the  use  of  the  Ex- 
changes during  the  height  of  the  marketing  season,  say  October, 
November  and  December,  to  buy  freely  from  the  producer,  even 


49 

though  there  is  at  the  time  no  active  demand  for  the  actual  spot 
cotton  from  his  customers — the  mills.  This  has  been  particularly 
the  case  in  the  last  two  seasons,  when  the  market  in  New  York 
and  New  Orleans  has  been  forced  up  during  the  active  marketing 
season  to  a  point  which  greatly  curtailed  the  demand  on  the 
part  of  the  mills,  but  this  condition  affected  very  little  the 
facility  of  the  producer  to  dispose  of  his  cotton  at  the  full 
market  price  or  of  the  merchant  to  buy  it  from  him,  on  account 
of  the  fact  that  merchants  of  experience  figured  that  it  would  only 
be  a  matter  of  time  until  conditions  would  right  themselves  and 
the  mills  would  again  be  active  buyers  of  the  spot  cotton,  as  in 
the  final  analysis  every  bale  must  find  its  way  to  a  spindle.  The 
cotton  merchants  of  Oklahoma,  therefore.,  continued  at  such  times 
to  buy  freely  and  to  protect  themselves  against  the  possibility 
of  a  decline  by  selling  ''futures"  contracts  for  an  equivalent  num- 
ber of  bales  in  New  York  or  New^  Orleans.  Their  judgment 
proved  correct  in  both  seasons.  After  the  great  bulk  of  the 
crop  had  been  marketed  speculators  in  New  York  and  New 
Orleans  found  that  they  had  bought  many  thousands  of  bales 
of  the  actual  cotton  from  merchants  who  owned  the  cotton  and 
were  in  position  to  deliver  it  to  them.  Upon  the  realization  of 
this  fact  by  the  speculators  a  decline  took  place  in  the  markets 
of  the  world  in  both  seasons,  which  put  the  market  to  a  point 
where  the  mills  could  see  their  way  clear  to  buy  cotton,  and 
as  fast  as  the  cotton  merchants  sold  the  cotton  to  the  mills  they 
bought  in  their  hedge  "futures"  contracts  in  New  York  and 
New  Orleans,  thus  closing  the  transaction.  In  the  meantime, 
however,  fully  80  per  cent,  of  the  crop  had  passed  from  the  hands 
of  the  producer,  at  the  top  prices  of  the  season. 

Without  the  New  York  and  New  Orleans  Cotton  Exchanges 
the  business  of  the  hundreds  of  cotton  merchants  throughout 
the  South,  whose  ramifications  reach  into  every  small  town 
throughout  the  cotton  belt  and  afford  a  market  every  day  to  the 
producer,  would  either  entirely  cease  or  else  be  so  seriously 
curtailed  that  the  great  bulk  of  the  cotton  business  would  prob- 
ably have  to  be  handled  by  methods  existing  forty  years  ago. 
These  methods,  as  you  know,  necessitated  the  shipment  of  the 
cotton  to  large  markets  for  storage  and  sale,  at  great  expense  for 
commissions,  interest,  insurance,  warehousing  and  other  atten- 
dant charges,  amounting,  I  should  say,  to  an  average  of  at  least 
$5.00  per  bale,  whereas  under  the  present  system  it  is  my  opinion 
that  the  cost  of  marketing  the  crop  from  the  producer  to  the 


50 

spinner,  so  far  as  the  expenses  and  profits  of  the  middle  man 
are  concerned,  would  hardly  exceed  an  average  of  $i.oo  per  bale. 

The  great  markets  of  New  York  and  New  Orleans  are  common 
meeting  places  for  producers,  merchants,  brokers  and  consumers 
all  over  the  world.  I  include  the  producer,  as  of  all  the  inter- 
ested parties  I  believe  he  uses  the  Exchange  to  as  great  an 
extent  as  any  of  the  other  factors  named.  I  have  shown  above 
how  the  producers  during  the  past  two  seasons  were  enabled  to 
dispose  of  their  cotton  at  a  time  when  the  markets  were  forced 
so  high  that  the  demand  from  the  mills  had  almost  ceased,  and 
it  is  my  judgment  that  in  the  last  two  years  the  cotton  producers 
of  the  South  have  been  enabled  to  market  at  top  prices  several 
millions  of  bales  on  the  New  York  and  New  Orleans  Cotton 
Exchanges,  the  buyers  being  speculators  scattered  all  over  the 
world. 

In  this  letter  I  have  spoken  more  particularly  of  the  speculator 
as  taking  one  side  of  the  contract  on  the  Exchanges,  but.  in 
reality  it  happens  more  often  that  both  sides  of  the  contract 
are  taken  by  parties  whose  sole  business  is  the  use  of  or  handling 
of  cotton,  who  wish  to  protect  themselves  against  fluctuations 
in  the  market  until  their  trades  can  be  definitely  closed  for  the 
actual  cotton. 

For  instance,  if  an  Oklahoma  City  cotton  merchant  should 
buy,  say,  500  bales  cotton  at  interior  towns  in  Oklahoma  from 
Farmers*  Union  gins  and  sundry  merchants  in  lots  of  25  to  100 
bales,  it  would  be  impossible  for  him  to  know  conclusively  the 
exact  number  of  bales  of  each  grade  in  the  500  bales  until  he 
sent  his  agent  to  class  and  receive  the  cotton.  In  the  busy  part 
of  the  season  this  often  lakes  a  week's  time,  and  in  the  meantime 
the  market  may  have  declined  a  cent  a  pound,  so  in  order  to 
protect  himself  he  sells  500  bales  of  "futures"  contracts  on  the 
New  York  or  New  Orleans  Exchange,  until  such  time  as  he 
knows  exactly  what  grades  he  is  in  position  to  offer  to  the  mills. 
On  the  other  hand,  a  mill  in  Russia,  say,  might  sell  their  yarns 
for  the  equivalent  of  500  bales  of  a  certain  grade  of  cotton, 
and  not  having  at  the  moment  satisfactory  offers  from  cotton 
merchants  for  the  desired  quantity,  quality  and  delivery,  will 
purchase  500  bales  of  "futures'*  contracts  in  New  York  or  New 
Orleans  to  protect  themselves  pending  a  time  when  they  can  make 
a  satisfactory  purchase  of  the  actual  spot  cotton.  It  is  quite 
conceivable,  therefore,  that  the  500  bales  of  "futures"  sold  by 
the  Oklahoma  City  merchant  will  be  bought  by  the  Russian  manu- 


51 

facturer,  both  buyer  and  seller  having  entered  into  a  perfectly 
legitimate  and  sound  contract  for  temporary  purpose  and  one 
which  protects  them  against  sharp  fluctuations  in  the  market  until 
they  can  close  the  transaction  by  agreeing  on  all  the  necessary 
details  as  to  grade,  price,  time  of  delivery,  method  of  payment, 
etc.,  of  the  actual  cotton  when  the  temporary  transaction  is 
reversed.  This  character  of  business  is  done  on  the  New  York 
and  New  Orleans  Cotton  Exchanges  every  day,  the  producers  of 
the  cotton  in  the  South  being  enabled,  by  the  use  of  the  tele- 
graph and  cable  to  meet  on  the  Exchange  the  consumer  of  their 
product  in  all  parts  of  the  world,  and  dispose  of  same  to  the 
best  possible  advantage,  with  the  minimum  of  risk  and  at  a 
minimum  of  expense. 

Eliminate  these  world-serving  market  places,  which  are  the 
economic  results  of  years  of  experience  and  study  and  a  "sur- 
vival of  the  fittest,"  and  we  go  back,  as  stated  before,  to  conditions 
ot  forty  and  fifty  years  ago,  resulting  in  almost  incalculable 
economic  loss  to  the  world  at  large,  and  particularly  to  the  cotton 
producers  of  the  South.  Take  away  the  opportunity  of  the 
hundreds  of  small  cotton  merchants  throughout  the  South  to 
hedge  their  transactions  and  protect  themselves  against  losses 
and  you  destroy  the  credit  which  is  now  freely  granted  them  by 
the  bankers  of  the  South,  and  without  which  they  would  be 
helpless.  No  conservative  banker  will  advance  $75-00  on  an 
article  to-day  which  may  only  be  worth  $70.00  next  week  and 
$60.00  next  month,  the  borrower  being  powerless  to  protect  him- 
self and  the  bank  in  the  meantime. 

Having  arrived  at  this  point,  there  is,  to  my  mind,  only  one 
drift  that  the  business  can  take.  The  hundreds  of  small  cotton 
merchants  in  the  South  being  eliminated  from  the  situation,  it 
will  become  necessary  for  the  producers,  by  the  aid  of  their  home 
merchants  and  banks,  to  ship  their  cotton  on  consignment,  as 
was  done  before  and  just  after  the  war,  to  the  large  markets, 
such  as  Memphis,  Galveston  and  New  Orleans,  at  much  greater 
expense  than  under  the  present  method  of  marketing,  and  where 
the  sale  of  their  cotton  will  be  almost  entirely  taken  out  of  their 
hands.  At  these  markets  a  few  powerful  firms  with  large  re- 
sources will  gradually  but  surely  come  into  possession  of  the 
bulk  of  the  business.  It  is,  of  course,  quite  likely  that  these 
same  firms  will,  to  some  extent,  send  their  agents  into  the 
interior  and  buy  direct  from  the  producer,  but,  in  my  opinion, 
the  result  will  be  almost  the  same;  the  small  dealers  being 
eliminated,  the  large  dealers  will  exact  a  heavier  tax  from  the 


52 

producer  for  their  services,  and  will  really  be  compelled  to  do 
so  on  account  of  the  increased  risks  in  the  business. 

I  have  faith  in  the  purpose  and  ability  of  a  majority  of  our 
law  makers  to  legislate  for  the  best  interests  of  the  people  of 
this  country,  and  I  do  not  believe  that  they  will  paralyze  the 
very  vitals  of  our  present  system  of  marketing  a  commodity 
running  into  an  annual  value  of  a  billion  dollars,  and  forming, 
as  it  does,  the  very  financial  life-blood  of  the  South. 

Respectfully  yours, 

W.  L.  Clayton,  President. 


COPY  OF  TELEGRAMS  SENT  ON  FEB.  14,  191 1,  BY  THE 
HOUSTON,    TEXAS,    COTTON    EXCHANGE    AND 
BOARD  OF  TRADE  TO  THE  CHAIRMAN  OF  THE 
COMMITTEE    ON    INTERSTATE   AND    FOR- 
EIGN COMMERCE  OF  THE  U.  S.  SENATE 
(Printed  by  permission  of  Mr.  A.  L.  Nelms) 

Houston,  Texas,  February  14,  191 1. 
Hon.  Chairman  of  the  Senate  Committee  on  Interstate  and 
Foreign  Commerce,  Washington,  D.  C. 
At  a  special  meeting  of  the  Board  of  Directors  of  the  Houston 
Cotton  Exchange  and  Board  of  Trade  held  to-day  a  resolution 
was  passed  requesting  me  to  wire  you  protesting  against  the 
passage  of  the  Scott  Anti-Option  Bill,  the  sense  of  this  Exchange 
being  in  opposition  to  the  bill. 

A.  L.  Nelms,  President. 


COPY    OF    TELEGRAMS    SENT    ON    FEB.    16,    191 1,    TO 

HON.  CHARLES  A.  CULBERSON  AND  HON.  JOSEPH 

W.  BAILEY,  U.  S.  SENATORS  FROM  TEXAS,  BY 

THE    PARIS,    TEXAS,    COTTON   EXCHANGE 

At  a  called  meeting  of  the  Paris  Cotton  Exchange  it  was 
resolved  that  it  is  the  sense  of  the  meeting  that  the  passage  of 
the  Scott  Anti-Option  Bill  would  cause  great  hardship  not  only 
to  the  Southern  buyer,  but  to  the  producer  of  cotton;  that  it 
will  transfer  all  hedging  to  Europe  and  place  us  at  the  mercy 
of  the   European  Exchanges. 

Ed.   Hutson,  Pres't, 


S3 

Greenville,  Texas,  May  2,  191 1. 
Mr.  Alfred  B.  Shepperson,  New   York,  N.  Y, 

Dear  Sir:  On  behalf  of  the  Greenville  Cotton  Exchange,  I  beg 
to  advise  you  that  the  members  are  opposed  to  the  *' Scott  Futures 
Bill." 

"Futures"  hedges  are  a  safeguard  to  us,  and  any  legislation 
should  leave  traders  in  cotton  free  to  protect  their  transactions 
as  is  most  convenient. 

Respectfully  yours, 
H.  L.  Warren, 
Sec'y  and  Treas.  Greenville  Cotton  Exchange. 


COPY  OF  TELEGRAMS  SENT  ON  FEBRUARY  15,  191 1,  TO 
HON.  A.  O.  BACON  AND  HON.  JOSEPH  M.  TERRELL, 
U.    S.    SENATORS    FROM    GEORGIA,    AND    TO 
HON.  MURRAY  M.  CRANE,  CHAIRMAN  COM- 
MITTEE   ON    INTERSTATE   COMMERCE 
OF  U.  S.  SENATE 
(Printed  by  permission  of  Paul  T.  Haskell,  Jr.,  Esq.,  Pres't  of 
Savannah   Cotton  Exchange) 
At  a  meeting  of  the  Board  of  Directors  of  the  Savannah  Cotton 
Exchange  held  this  day  the  following  resolution  was  adopted: 

Acknowledging  that  there  are  abuses  in  the  methods  of  the 
Cotton  Exchanges  dealing  in  "futures"  which  ought  to  be  cor- 
rected, the  abolition  of  dealing  in  "futures"  contracts  would  be  a 
serious  blow  to  the  cotton  industry,  and  we  respectfully  ask  that 
the  Senators  from  Georgia  appear  before  the  Senate  Committee 
and  protest  against  the  passage  of  the  Scott  Bill. 

Paul  T.  Haskell,  Jr., 
President  Savannah  Cotton  Exchange. 


COPY    OF   RESOLUTIONS   ADOPTED    BY   THE   RICH- 
MOND   (VIRGINIA)    CHAMBER  OF  COMMERCE 
ON  FEBRUARY  17,  191 1 
Believing  that  the  Scott  Anti-Option  Bill  now  before  the  United 
States  Senate  Committee  on  Interstate  and  Foreign  Commerce 
to  be   a   measure   in   restraint   of  trade   and   one   calculated  to 
decrease  the  value  of  the  South's  great  staple,  cotton,  causing  loss 


54 

to  our  planters  and  merchants  and  driving  to  foreign  countries 
business  now  done  here,  and  further  being  convinced  that  it  v^ill 
curtail  the  borrowing  capacity  of  planters  and  merchants  b}^ 
impairing  the  collateral  value  of  the  staple, 

Therefore  be  it  resolved  that  the  Board  of  Directors  of  the 
Richmond  Chamber  of  Commerce  do  most  earnestly  protest 
against  the  passage  of  this  bill,  and  do  hereby  invoke  the  active 
aid  of  the  Senators  from  Virginia  to  defeat  the  measure,  both 
before  the  committee  now  having  it  under  consideration  and  in 
the    Senate. 

Henry  W.  Wood,  President. 
Attest : 

R.  A.  DuNLOP,  Secretary. 


COPY   OF   LETTER    SENT   ON   FEB.    15,    191 1,    BY   THE 

NORFOLK  AND  PORTSMOUTH,  VIRGINIA,  COTTON 

EXCHANGE  TO  HON.  THOMAS  S.  MARTIN, 

U.  S.  SENATOR  FROM  VIRGINIA 

(Printed  by  permission  of  Mr.  John  H.  Rodgers,  President  of 

Norfolk  and  Portsmouth  Cotton  Exchange) 

Norfolk,  Va.,  February  15,  191 1. 
Hon.  Thomas  S.  Martin,  U.  S.  Senate, 

Washington,  D.  C 

Dear  Sir:  I  have  been  instructed  to  enlist  your  aid  in  behalf 
of  the  members  of  the  Norfolk  and  Portsmouth  Cotton  Ex- 
change to  defeat  the  enactment  of  the  Scott  Anti -Option  Bill 
into  law. 

The  large  majority  of  the  members  of  this  Exchange  are 
commission  men,  representing  the  interests  of  the  farmers  and 
merchants  of  the   Carolinas. 

To  do  away  with  the  dealing  in  deliveries  of  cotton  in  the 
future  would  for  a  long  time  throw  into  confusion  the  present 
methods  of  business,  which  are  a  result  of  many  years'  slow 
growth,  but  the  chief  damage  which  this  bill  would  cause  if  it 
became  law  would  be  to  the  cotton  growers  of  the  Southern 
States. 

To-day  the  operations  of  the  New  York  and  New  Orleans 
"futures"  markets  enables  and  facilitates  the  purchase  by  the 
outside  public  of  cotton  during  the  autumn  months,  when  the 
bulk  of  the  crop  is  marketed,  thus  relieving  the  glut  of  cotton 


55 

which  would  take  place  if  there  were  no  such  dealing  and 
enabling  the  farmer  to  obtain  a  fair  price  for  his  cotton  at  a 
time  when  he  is  forced  to  make  his  principal  deliveries. 

Were  the  American  "futures"  markets  eliminated  this  burden 
would  fall  entirely  upon  the  actual  consumer  of  cotton  and 
the  "futures"  markets  of  Liverpool  and  Havre,  which  are  dom- 
inated by  bearish  influences,  they  being  located  entirely  in  the 
consuming  countries. 

It  is  confidently  believed  that  such  a  law  would  cause  the 
Southern  producer  to  lose  from  fifty  to  one  hundred  and  fifty 
million  dollars  annually  in  the  lower  price  which  he  would  obtain 
for  his  cotton,  and  there  appears  really  no  good  purpose  which 
such  a  law  would  accomplish. 

The  dealing  in  "futures"  among  the  members  of  this  Exchange 
is  in  no  wise  a  speculative  one,  but  it  is  a  necessary  measure  in 
the  protection  in  their  day  to  day  dealings  in  the  conveyance 
of  the  cotton  crop  from  the  producer  to  the  consumer. 

This  Exchange  would  thank  you  for  any  active  interest  that 
you  can  take  to  defeat  the  measure. 

Very  respectfully  yours, 

Norman  Bell,  Secretary. 


THE    COMMERCIAL    NATIONAL    BANK    OF 
SHREVEPORT 

UNITED   STATES   DEPOSITORY 

Shreveport,  La.,  May  lo,  1911. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  I  am  pleased  to  acknowledge  receipt  of  your  favor 
of  the  5th  of  May  and  note  its  contents,  and  I  fully  agree  with 
the  cotton  merchants  of  the  South  as  to  the  usefulness  to  the 
cotton  trade  of  the  facilities  offered  by  the  New  York  and  New 
Orleans  Cotton  Exchanges  for  protection  of  their  transactions 
in  spot  cotton,  and  that  the  system  of  buying  and  selling  "cotton 
futures"  should  be  of  service  to  the  banks  as  an  additional 
protection  against  a  decline  in  the  cotton  on  which  they  have 
made  loans. 

The  banks  certainly  will  prefer  the  cotton  being  "hedged"  or 
protected  in  this  manner  against  decline  in  the  market,  and 
certainly  they  would  be  more  willing  to  make  advances  upon  it 
than  if  its  value  were  not  protected  in   the  manner  indicated. 


S6 

And  we  certainly  think  that  any  legislation  that  would  prevent 
transactions  in  cotton  "futures'*  on  the  New  York  and  New 
Orleans  Exchanges  would  deprive  the  banks  of  a  valuable  pro- 
tection on  their  advances  on  spot  cotton  awaiting  sale.  We 
certainly  feel  that  we  want  no  legislation  of  this  kind,  as  we 
want  all  the  protection  possible  to  get,  and  certainly  agree  with 
you  in  your  views. 

I  am  pleased  indeed  to  answer  your  letter. 

Yours  very  truly, 

P.  YouREE,  President 


THE  AUSTIN  NATIONAL  BANK 
Capital  $300,000  Surplus  and  Profits  $325,000 

Austin,  Texas,  May  8,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir:  Your  letter  of  the  5th  asking  my  views  in  reference 
to  cotton  hedging  is  received. 

In  reply  I  beg  to  say  to  you,  in  brief,  that  cotton  men  who 
sell  cotton  before  they  buy  it  must  of  necessity  hedge  their 
sales  in  order  to  do  anything  like  a  safe  business.  Cotton  firms 
who  do  not  protect  themselves  in  this  way  are  unsafe  customers 
for  a  bank,  and  the  banks  would  not  care  to  handle  their  account. 

Yours  truly, 

E.   P.  WiLMOT,  President. 


BANK  OF  COMMERCE  AND  TRUST  CO., 
MEMPHIS,  TENN. 

CAPITAL    AND    SURPLUS   TWO    MILLION   DOLLARS 

Memphis,  Tenn.,  May  9,  1911. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  I  have  your  letter  of  May  5th. 

We  understand  thoroughly  well  the  system  of  "hedging'* 
practiced  by  cotton  buyers,  who  are  cotton  merchants,  for  pro- 
tection. Many  of  our  customers  feel  that  they  cannot  afford 
to  hold  cotton  that  is  not  "hedged."  It  gives  them  a  feeling 
of  security,  and  that  feeling  of  security  is  shared  by  the  bank. 
It  is  a  necessary  part  of  present  business  methods. 

The  small  or  weaker  cotton  buyer  needs  the  protection  afforded 
by  "hedging"  more  than  the  large  one  does,  as  banks  would 
extend  credit  to  a  buyer  having  a  large  estate  for  a  reasonable 


57 

amount  of  cotton  not  hedged ;  but  to  the  buyer  who  has  no  estate 
"hedging"  is  a  necessary  arrangement  for  credit.  The  discon- 
tinuation of  such  facility  would  greatly  decrease  competition. 

Yours  very  truly, 

T.  O.  Vinton,  President. 


CITIZENS'  NATIONAL  BANK 

(united  states  depository) 

Meridian,  Miss.,  May  13,   191 1. 
Alfred  B.  Shepperson,  Esq.,  New  York,  N.  Y. 

Dear  Sir:  While  I  am  President  of  the  Citizens'  National 
Bank,  I  take  no  part  in  the  details  of  the  business. 

Personally  I  consider  legitimate  transactions  in  "cotton  futures" 
as  essential  to  the  safety  of  the  dealer  in  spot  cotton.  The 
merchant  who  knows  how  to  "hedge"  can  avoid  loss  by  a  decline 
in   cotton. 

"Futures"  dealing  only  hurts  the  gambler  that  gets  on  the 
wrong  side. 

I  cannot  see  how  the  producers  of  cotton  can  be  injured  either 
by  legitimate  or  illegitimate  trading  in  "futures."  On  the  con- 
trary, I  believe  they  would  be  the  greatest  sufferers  by  its 
prohibition. 

Yours  truly, 

H.  M.  Street. 


THE  MURCHISON  NATIONAL  BANK 
Capital  $825,000  Surplus  $425,000 

Wilmington,  N.  C,  May  8,  191 1. 
!  Mr.  A.  B.  S  hep  person,  New  York,  N.  Y. 

Dear  Sir:  I  have  your  favor  of  the  6th  inst. 

We  know  that  buyers  of  cotton  all  over  the  South  buy  the 
actual  cotton  and  sell  on  the  Cotton  Exchanges  to  protect  them- 
selves from  loss  by  a  decline.  Where  cotton  is  handled  in  this 
way  lenders  of  money,  knowing  that  it  has  been  sold  at  its  cur- 
rent value,  lend  more  readily  on  it  and  nearer  to  its  value  than 
they  otherwise  would.  On  cotton  held  on  speculation  we  always 
require  a*  large  margin  against  a  possible  decline  in  the  price. 

I  think  the  Cotton  Exchanges  are  as  necessary  now  in  legiti- 
mate business  as  any  other  organization  can  be.  In  fact,  to 
stop    "futures"   transactions   in    cotton    would,    in    my    opinion, 


SB 

demoralize  the  whole  cotton  trade  in  this  country.  People  are 
going  to  sell  cotton  and  other  staple  products  for  future  delivery, 
and  the  business  of  "futures"  sales  will  be  transferred  to  foreign 
markets,  which  would  entail  a  heavy  loss  on  the  business  of 
this  country. 

Yours  truly, 

H.  C.  McQueen,  President. 


THE  MERCHANTS'  AND  PLANTERS'  BANK  OF 
PINE  BLUFF 

Pine  Bluff,  Ark.,  May  lo,  191 1. 
Mr.  Alfred  B.  She p person,  New  York,  N.  Y. 

Dear  Sir  :  Yours  of  the  6th  received.  All  well-regulated  banks 
compel  the  buyers  of  spot  cotton  to  keep  it  hedged  with  "futures" 
or  margined  to  an  extent  that  the  most  timid  bank  would  feel 
safe;  the  latter  means  a  restricted  business  and  a  cramped 
feeling   to    all    concerned. 

Without  the  use  of  the  "futures"  market  in  the  cotton  business 
credit  would  be  hurt  and  the  price  of  cotton  be  on  the  basis  of 
rice  or  any  commodity  now  not  enjoying  the  privilege  of  the 
"futures"  hedge.  If  Congress  takes  this  away  from  the  cotton 
growers  there  will  be  seen  many  new  faces  from  the  South  in 
both  Houses  of  Congress  just  as  soon  as  the  change  can  be  made. 

Yours  respectfully, 

S.  C.  Alexander,  President. 


THE  FIRST  NATIONAL  BANK  OF  ADA 

Ada,  Oklahoma,  May  9,  191 1. 
Mr.  Alfred  B.  She p person,  Nezv  York,  N.  Y. 

Dear  Sir:  Replying  to  your  favor  of  the  6th  inst.  in  regard 
to  the  usefulness  to  the  cotton  trade  of  the  facilities  offered  by 
the  New  York  and  New  Orleans  Cotton  Exchanges  for  pro- 
tecting transactions  in  spot  cotton,  beg  to  advise  that  I  think  the 
facilities  offered  by  these  Exchanges  are  practically  indispensable 
in  the  handling  of  spot  cotton,  and  am  very  much  opposed  to  the 
proposed  legislation  seeking  to  prevent  transactions  in  cotton  for 
future  delivery  on  these  Exchanges. 

Yours  truly, 

P.  A.  Norris,  President, 


59 

DELTA   BANK 

Greenwood,  Miss.,  May  9,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.   Y. 

Dear  Sir:  Replying  to  your  favor  of  the  5th  inst.,  we  believe 
that  the  cotton  Exchanges  at  New  York  and  New  Orleans  per- 
form an  important  service  when  their  contracts  are  used  as  a 
hedge  by  spot  cotton  merchants,  spinners  and  planters.  If  these 
Exchanges  were  deprived  of  these  functions  the  risk  to  banks 
in  handling  the  cotton  crop  would  be  much  greater  than  at 
present. 

We  believe,  though,  that  the  New  York  contract  would  be 
greatly  improved  for  legitimate  purposes  if  each  contract  for 
100  bales  should  contain  no  more  than  three  half  grades  and 
those  in  sequence.  Also  that  staple  shorter  than  ^  inch  should 
receive  a  proper  penalty,  while  staple  of  i  1/16  and  upward  should 
receive  a  premium  proportionate  with  the  spinning  value.  Re- 
vision of  differences  in  both  grade  and  staple  should  occur  at 
least  four  times  annually.  By  these  changes  cotton  accepted 
by  spinners  from  the  New  York  stock  should  be  in  a  usable 
shape  for  most  manufacturers  making  other  than  fine  goods. 
Prompt  delivery  to  the  buyer  who  takes  up  spot  cotton  on  the 
New  York  contract  should  at  all  times  be  effected. 
Yours   very  truly, 

W.  R.  Humphrey,  President. 


Designated  Depository  of  the  United  States 
FIRST    NATIONAL   BANK 

Meridian,  Miss.,  May  20,  1911. 
'  Mr.  A.  B.  Shepperson,  New  York,  N.  Y, 

Dear  Sir:  In  reply  to  your  letter  of  8th  inst.,  beg  to  say  that 
1  I  think  the  facilities  for  covering  the  sales  of  spot  cotton  by  the 
purchase  of  ''futures'*  contracts  are  undoubtedly  a  great  pro- 
tection to  the  cotton  buyer  and  necessarily  add  very  greatly  to 
the  protection  of  the  banks,  who  are  accustomed  to  lend  credit 
based  on  such  sales.  I  think  any  curtailment  of  the  facilities 
would  add  greatly  to  the  hazard  of  the  conduct  of  the  cotton 
business  and  also  of  the  transactions  of  the  banks  with  reference 
to  handling  such  accounts. 

Yours  truly, 

Edwin  McMorries,  President. 


6o 

THE  FIRST   NATIONAL   BANK  OF  HOUSTON 

Houston,  Texas,  May  9,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y. 

Dear  Sir:  Replying  to  yours  of  the  5th  inst.,  we  believe  all 
bankers  handling  cotton  accounts  should  know  that  the  purchases 
of  their  customers  are  covered  either  by  actual  sales  or  hedged 
through  the  "futures"  market. 

Should  the  hedging  facilities  offered  by  the  New  York  and 
New  Orleans  Cotton  Exchanges  be  withdrawn  by  legislation,  no 
doubt  the  great  preponderance  of  such  business  would  go  to  the 
Liverpool  Exchange. 

The  good  uses  of  the  Exchanges  in  this  country  are  overlooked 
by  many  by  reason  of  the  unquestionable  abuses  it  has  led  to 
in  the  way  of  indiscriminate  speculation. 

Certainly  no  thoughtful  business  man  overlooks  the  advantages 
and  benefits  of  the  proper  use  of  our  two  large  cotton  Exchanges, 
and  the  abuses  and  criticisms  have  been  largely  brought  about 
by  the  misdirected  efforts  of  some  of  the  members  to  secure 
additional  business,  not  of  legitimate,  but  of  purely  speculative 
character. 

Yours  very  truly, 

H.  R.  Eldridge,.  Vice-President. 


CENTRAL  TEXAS   NATIONAL  BANK   OF  WACO 

Waco,  Texas,  May  12,  191 1. 
Mr.  Alfred  B.  Shepperson,  New  York,  N.  Y, 

Dear  Sir:  We  have  your  letter  of  May  5th  concerning  legis- 
lation against  the  sale  of  cotton  for  future  delivery.  We  believe 
the  New  York  and  New  Orleans  Cotton  Exchanges  are  beneficial 
to  the  banks,  or  to  those  persons  who  furnish  money  for  buying 
cotton,  by  enabling  the  buyers  of  spot  cotton  to  hedge  against 
any  loss. 

If  the  use  of  the  Exchanges  could  be  restricted  to  the  cotton 
buyers,  or  firms  actually  dealing  in  cotton,  or  for  spinners,  we 
believe  the  Exchanges  could  be  operated  without  harm  to  any 
one  and  for  the  good  of  the  cotton  business. 

Yours  truly, 

W.  H.  McCuLLoUGH,  Pres't. 


C 


6i 

COPY    OF    TELEGRAM     SENT    BY    THE    BANKS    OF 

GAINESVILLE,     TEXAS,     TO     HON.     JOSEPH     W. 

BAILEY  AND  HON.  C.  A.  CULBERSON,  UNITED 

STATES    SENATORS    FROM   TEXAS,   ON 

FEBRUARY  15,  191 1 

We  as  bankers  handling  cotton  accounts  feel  that  the  passing 
of  the  Scott  Anti-Option  Bill  would  impair  the  credit  of  our 
customers,  destroy  our  safety  in  advancing  money  on  cotton 
and  eventually  throw  the  burden  of  the  risk  and  loss  on  the 
producer. 

(Signed) 

First  National  Bank, 

By  J.  W.   Gladney,  Cashier, 
Lindsay  National  Bank, 

By  J.  M.   Lindsay,  Pres't. 
First  State  Bank, 

By  J.  W.  Downward,  Pres't. 
German-American  State  Bank, 
By  H.   P.   Ware,  Pres't. 


CITIZENS'   BANK  &  TRUST   CO. 

Austin,  Texas,  May  15,  191 1. 

Mr.  Alfred  B.  Shep person,  New  York,  N.  Y, 

Dear  Sir  :  We  have  your  favor  of  the  9th,  which  has  been  very 
carefully  noted,  and  in  reply  we  beg  to  say  that  we  do  not  see 
how  it  is  possible  for  the  cotton  merchants  of  the  South  to  handle 
their  business  on  a  safe  and  conservative  basis  without  the  facili- 
ties of  the  New  York  and  New  Orleans  Cotton  Exchanges  for 
protecting  their  transactions.  We  wish  further  to  say  that  we 
do  not  care  to  handle  the  account  of  any  cotton  merchant  unless 
we  know  that  they  could  hedge  their  business  in  a  safe  way.  Of 
course  as  long  as  the  merchant  is  using  his  personal  funds  for 
the  buying  of  cotton  we  would  have  no  control,  but  the  moment 
that  his  funds  were  exhausted  and  he  would  become  a  borrower 
of  our  bank,  the  first  thing  we  would  want  to  know  was  whether 
the  cotton  was  sold  or  hedged,  and  if  not  sold,  we  would  want 
to  know  that  he  had  hedges  out  against  it;  otherwise  it  would 
be  a  very  risky  loan  for  any  bank  unless  ample  margin  was  left 


62 

with  us,  but  as  a  rule  cotton  merchants  in  this  section  of  the 
belt  do  not  carry  ample  margin.  If  the  privilege  of  hedging  was 
taken  from  the  cotton  merchants  we  do  not  believe  it  would  be 
possible  for  them  to  continue  in  business  except  on  direct  orders ; 
in  this  way  the  farmer  would  be  at  the  mercy  of  the  consumer. 

Yours  truly, 

Wm.  R.  Hamby,  President. 


THE  FIRST  NATIONAL  BANK  OF  GALVESTON 
Galveston,  Texas,  May  15,  191 1. 
Mr.  Alfred  B.  Shepperson,  Nezv  York,  N.  Y. 

Dear  Sir:  In  reply  to  your  favor  of  the  5th  inst.,  beg  to  say 
my  understanding  is  that  cotton  buyers,  by  a  system  of  hedging, 
protect  themselves  againct  fluctuations  of  the  market  while  they 
are  holding  spot  cotton,  and  to  ^this  extent  at  least  "futures" 
appear  to  serve  a  useful  purpose.  Advances  made  against  cotton 
so  protected  are  certainly  safer  than  if  cotton  is  not  protected 
by  hedging. 

Yours  very  truly, 

Fred.  W.  Catterall,  Cashier. 


The  letters  from  Southern  bankers  on  pages  55  to  62  were  in 
response  to  my  inquiries  if  the  banks  would  not  be  more  willinj^ 
to  make  loans  on  cotton  agamst  which  ''cotton  futures"  had  been 
sold  than  when  its  value  was  not  thus  protected ;  also  if  legis- 
lation which  prevented  transactions  in  cotton  for  future  delivery 
on  the  New  York  and  New  Orleans  Cotton  Exchanges  would 
not  deprive  the  banks  of  a  valuable  protection  for  their  advances 
on  spot  cotton  awaiting  sale. 

Alfred  B.  Shepperson. 


63 

[COPY  OF  THE  BILL  KNOWN  AS  THE  SCOTT  ANTI- 
OPTION   BILL  PASSED   BY  THE  UNITED   STATES 
HOUSE  OF  REPRESENTATIVES  ON  JUNE  23, 1910 
AN  ACT 

To  prohibit  interference,  with  commerce  among  the  States  and 
Territories  and  with  foreign  nations,  and  to  remove  obstruc- 
tions thereto,  and  to  prohibit  the  transmission  of  certain 
messages  by  telegraph,  telephone,  cable,  or  other  means  of 
communication  between  States  and  Territories  and  foreign 
nations. 
Be  it  enacted  by  the  Senate  and  House  of  Representatives  of 
the  United  States  of  America  in  Congress  assembled.  That  certain 
words  used  in  this  Act  and  in  proceedings  pursuant  hereto  shall, 
unless  the  same  be  inconsistent  with  the  context,  be  construed 
as  follows :  The  word  ''message"  shall  mean  any  communication 
by  telegraph,  telephone,  wireless  telegraph,  cable,  or  other  means 
of  communication  from  one  State  or  Territory  of  the  United 
States  or  the  District  of  Columbia  to  any  other  State  or  Terri- 
tory of  the  United  States,  or  the  District  of  Columbia  or  to  any 
foreign  country.  The  word  "person"  shall  mean  any  person, 
partnership,  joint  stock  company,  society,  association,  or  cor- 
poration, their  managers  and  officers,  and  when  used  with  refer- 
ence to  the  commission  of  acts  which  are  herein  required  or 
forbidden  shall  include  persons  who  are  participants  in  the 
required  or  forbidden  acts,  and  the  agents,  officers,  and  members 
of  the  boards  of  directors  and  trustees,  or  other  similar  con- 
trolling or  directing  bodies  of  partnerships,  joint  stock  com- 
panies, societies,  associations,  and  corporations.  And  words 
importing  the  plural  number,  wherever  used,  may  be  applied  to 
or  mean  only  a  single  person  or  thing,  and  words  importing  the 
singular  number  may  be  applied  to  or  mean  several  persons  or 
things. 

Section  2.  That  it  shall  be  unlawful  for  any  person  to  send 
or  cause  to  be  sent  any  message  offering  to  make  or  enter  into 
a  contract  for  the  purchase  or  sale  for  future  delivery  of  cotton 
without  intending  that  such  cotton  shall  be  actually  delivered 
or  received,  or  offering  to  make  or  enter  into  a  contract  whereby 
any  party  thereto  or  any  party  for  whom  or  in  whose  behalf  such 
contract  is  made  acquires  the  right  or  privilege  to  demand  in  the 
future  the  acceptance  or  delivery  of  cotton  without  being  thereby 
obligated  to  accept   or  to  deliver  such  cotton;   and  the   trans- 


64 

mission  of  any  message  relating  to  any  such  transaction  is  hereby 
declared  to  be  an  interference  with  commerce  among  the  States 
and  Territories  and  with  foreign  nations.  Any  person  who  shall 
be  guilty  of  violating  this  section  shall,  upon  conviction  thereof, 
be  fined  in  any  sum  not  more  than  one  thousand  dollars  nor 
less  than  one  hundred  dollars  or  shall  be  imprisoned  for  not 
more  than  six  months  nor  less  than  one  month,  or  by  both  such 
fine  and  imprisonment,  and  the  sending  or  causing  to  be  sent  of 
each  such  message  shall  constitute  a  separate  offense. 

Section  3.  That  it  shall  be  the  duty  of  any  person  sending  any 
message  relating  to  a  contract  or  to  the  making  of  a  contract 
for  future  delivery  of  cotton  to  furnish  to  the  person  transmitting 
such  message  an  affidavit  stating  that  he  is  the  owner  of  such 
cotton  and  that  he  has  the  intention  to  deliver  such  cotton;  or 
that  such  cotton  is  at  the  time  in  actual  course  of  growth  on 
land  owned,  controlled,  or  cultivated  by  him  and  that  he  has 
the  intention  to  deliver  such  cotton;  or  that  he  is,  at  the  time, 
legally  entitled  to  the  right  of  future  possession  of  such  cotton 
under  and  by  authority  of  a  contract  for  the  sale  and  future 
delivery  thereof  previously  made  by  the  owner  of  such  cotton, 
giving  the  name  of  the  party  or  names  of  parties  to  such  con- 
tract and  the  time  when  and  the  place  where  such  contract  was 
made  and  the  price  therein  stipulated,  and  that  he  has  the  inten- 
tion to  deliver  such  cotton ;  or  that  he  has  the  intention  to  acquire 
and  deliver  such  cotton  or  that  he  has  the  intention  to  receive 
and  pay  for  such  cotton:  Provided,  That  any  person  electing  to 
do  so  may  file  with  the  telegraph,  telephone,  wireless  telegraph, 
or  cable  company  an  affidavit  stating  that  the  message  or  messages 
being  sent,  or  to  be  sent,  for  the  six  months  next  ensuing  by 
such  person  do  not  and  will  not  relate  to  any  such  contract  or 
offers  to  contract  as  are  described  in  section  two  of  this  Act,  and 
any  such  company  shall  issue  thereupon  a  certificate  evidencing 
the  fact  that  such  affidavit  has  been  duly  filed  and  such  certificate 
shall  be  accepted  in  lieu  of  the  affidavit  herein  required  at  all  the 
transmitting  offices  of  such  company  during  the  life  of  said 
affidavit.  Any  person  who  knowingly  shall  make  a  false  state- 
ment in  any  affidavit  provided  for  in  this  Act  shall  be  punished 
by  a  fine  of  not  more  than  five  thousand  dollars  nor  less  than 
five  hundred  dollars  or  shall  be  imprisoned  for  not  more  than 
two  years  nor  less  than  one  year,  or  by  both  such  fine  and 
imprisonment.  And  in  any  prosecution  under  the  provisions  of 
section  two  or  three  of  this  Act  the  proof  of  failure  to  make  any 


6s 

affidavit  herein  required  shall  be  prima  facie  evidence  that  said 
message  or  messages  related  to  a  contract  prohibited  by  section 
two  of  this  Act,  and  the  proof  of  failure  to  deliver  or  receive 
the  cotton  called  for  in  any  contract  for  future  delivery  of  cotton 
shall  be  prima  facie  evidence  that  there  was  no  intention  to 
deliver  or  receive  such  cotton  when  said  contract  was  made. 

Section  4.  That  any  agent  of  any  telegraph,  telephone,  wire- 
less telegraph,  or  cable  company  to  whom  messages  herein  de- 
scribed may  be  tendered  is  hereby  required,  empowered,  and 
authorized  to  administer  any  oath  required  to  be  made  under 
the  provisions  of  this  Act  with  like  effect  and  force  as  officers 
having  a  seal,  and  such  oath  shall  be  administered  without  any 
charge  therefor. 

Section  5.  That  it  shall  be  unlawful  for  any  person  owning 
or  operating  any  telegraph  or  telephone  line,  wireless  telegraph, 
cable,  or  other  means  of  communication,  or  any  officer,  agent, 
or  employee  of  such  person,  knowingly  to  use  such  property  or 
knowingly  to  allow  such  property  to  be  used  for  the  transmission 
of  any  message  relating  to  such  contracts  as  are  described  in 
section  two  of  this  Act.  Any  person  who  shall  be  guilty  of 
violating  this  section  shall,  upon  conviction  thereof,  be  punished 
for  each  offense  by  a  fine  of  not  more  than  one  thousand  dollars 
nor  less  than  five  hundred  dollars,  and  the  sending  of  each 
message  in  violation  of  the  provisions  of  this  section  shall  con- 
stitute a  separate  offense. 

Section  6.  That  every  book,  newspaper,  pamphlet,  letter,  writ- 
ing or  other  publication  containing  matter  tending  to  induce  or 
promote  the  making  of  such  contracts  as  are  described  in  section 
two  of  this  Act  is  hereby  declared  to  be  non-mailable  matter, 
and  shall  not  be  carried  in  the  mail  or  delivered  by  any  post- 
master or  letter  carrier.  Any  person  who  shall  knowingly 
deposit  or  knowingly  cause  to  be  deposited  for  mailing  or  delivery 
any  matter  declared  by  this  section  to  be  non-mailable,  or  shall 
knowingly  take  or  cause  the  same  to  be  taken  from  the  mails 
for  the  purpose  of  circulating  or  disposing  thereof,  or  of  aiding 
in  the  circulation  or  disposition  thereof,  shall  be  fined  not  more 
than  five  thousand  dollars  nor  less  than  five  hundred  dollars, 
or  shall  be  imprisoned  not  more  than  five  years  nor  less  than 
one  year,  or  both.  Any  person  violating  any  of  the  provisions 
of  this  section  may  be  proceeded  against  by  information  or  indict- 
ment and  tried  and  punished  either  in  the  district  at  which  the 


66 

unlawful  publication  was  mailed  or  to  which  it  is  carried  by 
mail  for  delivery  according  to  the  direction  thereof,  or  at  which 
it  is  caused  to  be  delivered  by  m.ail  to  the  person  to  whom  it  is 
addressed. 

Section  7.  That  the  Postmaster  General,  upon  evidence  satis- 
factory to  himself  that  any  person  is  sending  through  the  mails 
of  the  United  States  any  matter  declared  by  section  six  of  this 
Act  to  be  non-mailable,  may  instruct  the  postmasters  in  the 
post-offices  at  which  such  mail  arrives  to  return  all  such  mail  to 
the  postmaster  in  the  post-office  at  which  it  was  originally  mailed, 
with  the  word  "unlawful"  plainly  written  or  stamped  upon  the 
outside  thereof,  and  all  such  mail,  when  returned  to  said  post- 
master, shall  be  returned  to  the  sender  or  publisher  thereof  under 
such  regulations  as  the  Postmaster  General  may  prescribe. 

Section  8.  That  in  any  proceeding  under  this  Act  all  persons 
may  be  required  to  testify  and  to  produce  books  and  papers,  and 
the  claim  that  such  testimony  or  evidence  may  tend  to  criminate 
the  persons  giving  such  testimony  or  producing  such  evidence 
shall  not  excuse  such  person  from  testifying  or  producing  such 
books  and  papers;  but  no  person  shall  be  prosecuted  or  subjected 
to  any  penalty  or  punishment  whatever  for  or  on  account  of  any 
transaction,  matter,  or  thing  concerning  which  he  may  testify 
or   produce   evidence  of  any  character  whatever. 


ACTION  OF  THE  UNITED  STATES  SENATE  ON  THE 
SCOTT  ANTI-OPTION  BILL 

The  bill  was  referred  to  the  Committee  on  Interstate  Com- 
merce of  the  Senate  and  reported  by  that  Committee  to  the  Senate 
on  February  17,  1911,  with  proposed  amendments  as  follows: 

All  of  Section  4  (requiring  agents  of  Telegraph,  Telephone, 
Wireless  Telegraph  or  Cable  Companies  to  administer  oaths  to 
senders  of  messages)   to  be  omitted. 

All  of  Sections  6  and  7  (prohibiting  the  use  of  the  mails  for 
all  "matter  tending  to  induce  or  promote  the  making"  of  con- 
tracts respecting  Cotton  for  Future  Delivery)  to  be  omitted. 

No  further  action  in  regard  to  the  bill  was  taken  by  the 
61  st  Congress,  which  adjourned  on  March  4,  191 1. 

The  bill  is  called  the  "Scott  Bill"  because  it  was  introduced  by 
Mr.  Charles  F.  Scott,  member  of  the  House  of  Representatives 
from  Kansas.    Mr.  Scott  was  not  re-elected  to  the  626.  Congress, 


DATE 


I 


YA  02560 


rv 


223170 

^a  604-7 


